Weekly: World Cup, Economies, and Markets

Our top-two picks for the World Cup are Germany and Brazil. Top ranking in football is the playground of middle- and upper-income economies. When ranking falls below 50, income and performance link fa...
Taimur Baig, Ma Tieying14 Jun 2018
  • Asian countries have by and large slipped in their rankings in the past decade
  • China’s football dream remains unfulfilled
  • The STI has declined by an average of 8.6% in the two months around the past six World Cups
  • In the credit space, the six months after a World Cup…
  • …tend to be better than the preceding six months
Photo credit: AFP Photo

There will be late nights across Asia for the next one month as football fans give up sleep to follow the World Cup Football tournament in Russia. Asia doesn’t have a stellar record in this premier event, but that doesn’t detract from passionate following.

First, who will win? In Group Research, we have no shortage of data crunchers, but we also have those who go entirely with their hearts. Our internal polls find Germany and Brazil are the top two favourites, in line with market odds. But that’s where our alignment with the market ends. Strangely, we found no takers for highly ranked Portugal and Spain, but a few of us like Belgium and France.

Do more prosperous countries do better in football? When we consider real per capita GDP of the top-50 teams ranked by FIFA we find that except for two outliers (Senegal, ranked 27, and Congo, ranked 39), high ranking in football is indeed the playground of middle- and upper-income economies.

But this empirical regularity holds only in the top-50. For the countries ranked 51-100, we see virtually no relationship between income and performance whatsoever.

For us here in Asia, even the 1 to 100 rank is not sufficient to find most countries of the continent. Indeed, Asean countries are all ranked well below 100, and even the most successful Asian countries, Japan and South Korea, rank below 50. China, despite its massive investments in recent decades, remains mired at 75. Compare that with tiny Iceland (population: 330k, ranking: 20) and Bosnia (3.5mn, 40).

Not only are Asian footballing nations poorly ranked, they have by and large become worse over the past two decades. Countries from Eastern Europe and Central Asia have made significant inroads since then, leaving far more prosperous and populous Asian economies behind. Clearly, while Asia is hard at work studying, building, and saving, something is getting lost in the exhilarating world of football.

In the attached publication, our country economists and strategists look at the experience of Asian stalwarts South Korea and Japan, the gulf between China’s aspirations and reality, and some interesting observations on what the FX, rates, credit, and equities markets do during the tournament. We hope you enjoy the Word Cup, and find our World Cup Special fun.

China’s unfulfilled “Football Dream”
South Korea and Japan, Asia’s bright spots
FX: World Cups have been currency friendly
Rates: Europeans are great in football; bad in debt
Equities: Too much watching and too little trading
Credit: A post-World Cup rally?

To read the full report, click here to Download the PDF.

Taimur Baig, Ph.D.

Chief Economist - G3 & Asia

Ma Tieying

Economist - Japan, South Korea, & Taiwan

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