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Asia’s World Cup: Commerce 1, Football 0?

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Pacific Money

Asia’s World Cup: Commerce 1, Football 0?

Teams from the region may struggle, but the World Cup could be a boon for Asian companies.

Asia’s World Cup: Commerce 1, Football 0?
Credit: Football via

Asian football fans can shorten their Brazil holiday plans, with the region’s teams not expected to enjoy a lengthy stay at the FIFA World Cup. Away from the pitch, however, next month’s event is still set to generate gains for some of the region’s biggest companies, and possibly even Japanese stocks.

According to The Diplomat’s Samuel Chi, Iran is the highest-ranked Asian team at the world’s biggest sporting event, ranked 37th compared to other Asian contenders Japan (47th), South Korea (55th) and Australia in 59th. But only the two East Asian neighbors are seen as having hope of progressing from the group matches, with Japan getting the most favorable odds from bookmakers of winning the Cup at an unlikely 150 to 1.

In its World Cup and Economics 2014 report, Goldman Sachs assigned only an 11.5 percent probability to Australia’s “Socceroos” escaping their so-called “Group of Death” comprising Spain, the Netherlands and Chile. While Japan, Iran and South Korea are given a 34 percent to 49 percent chance of progression from their somewhat easier groups, they are still tipped to exit at the Round of 16 stage.

All four teams are rated around a zero to 0.1 percent chance of claiming the ultimate prize, with the investment bank’s statisticians predicting a 3-1 win by Brazil against its arch-rival Argentina in the July 13 final at Rio de Janeiro’s famous Maracana stadium.

Interestingly though, Goldman Sachs argues that the Cup also influences stockmarkets, albeit only briefly.

“Looking at history, there is a clear pattern of outperformance by the winning team in the weeks after the World Cup final. On average, the victor outperforms the global market by 3.5 percent in the first month – a meaningful amount, although the outperformance fades significantly after three months,” it said.

“But sentiment can only take you so far, in markets at least – the winning nation doesn’t tend to hold on to its gains and, on average, sees its stockmarket underperform by around 4 percent on average over the year following the final. The message seems to be: enjoy the gains while they last…”

For Japan stock watchers, Goldman Sachs reports “a loose negative correlation” between the Nikkei Stock Average and the FIFA ranking of the “Samurai Blue.”

“Based on our simple regression model using FIFA rankings and the Nikkei, [Japan’s] current FIFA ranking of 47th indicates that the Nikkei should be 15,100,” it said, giving hope for further gains in 2014.

Asian Champion?

Despite Asia’s growing economic clout, it could be some time before a team from the region becomes champion, given the dominance of Europe and South America. South Korea’s success in reaching the semi-finals of the 2002 World Cup and its regular participation in the event along with Japan are rare bright spots in a region that has relatively underperformed.

While China and India together account for more than a third of the world’s population, neither qualified for this year’s 32-nation tournament and both are seen as unlikely to reach a final in the next 20 years.

According to Goldman Sachs, the number of registered players in China is half that of the Netherlands, with Beijing preferring to focus its sporting investment on the medal-heavy Olympics. Currently ranked 96th by FIFA, China’s underperformance in football is expected to continue, despite increased business investment and the game’s popularity in the nation of 1.3 billion people.

India is ranked a lowly 147th by FIFA and has never qualified for the finals, with Goldman Sachs blaming poor infrastructure, competition from cricket, a weak administration, and lack of training.

Meanwhile, a survey by Repucom of the world’s top 10 most marketable players did not contain any Asian players, despite the domestic popularity of players such as Japan’s Shinji Kagawa and Keisuke Honda, or South Korea’s Son Heung-Min.

Brand Power?

Off the pitch, Asian companies continue to invest in the tournament, partly in hope of enjoying the “feel-good” factor from a winning national side. Korean automakers Hyundai and Kia are currently official “FIFA Partners,” while Korean technology companies have invested in related marketing campaigns.

Other Asian companies recognized by FIFA include Japan’s Sony (a FIFA Partner), while China’s Yingli Solar is an official World Cup sponsor, among an estimated total $9 billion four-year corporate rights package for the sport’s governing body.

With an estimated audience of more than 6 billion television viewers, FIFA’s official sponsors are eyeing the benefit of expected “record-breaking” digital and social media activity, although “non-affiliated” brands are also set to cash in.

Writing in PR Daily, marketing executive Trevor Cairns noted the benefit of brands already aligned to sporting activity, citing Red Bull’s success at the Sochi Olympics despite not being an official partner.

Noting the counterproductive efforts by FIFA to pursue non-sponsors in the past, Cairns added: “And is there anything positive in an association with FIFA? An organization beset with allegations of bribery and self-interest over those with the beautiful game. It is an increasingly tarnished brand, and it seems only a matter of time before its partners are tarred with the same brush.”

Nevertheless, others are more upbeat about the prospects for sponsors to score some sales goals from the event.

“To put things into context, at this year’s World Cup, the partners will have access to communicate with over 50 per cent of the world’s population. Four billion fans will tune in on television, as well as a multitude of digital and social media channels. It’s a monumental chance for brand exposure, as well as a battle for interest and space,” brandRapport’s Sam Feasey wrote in Goal.

According to Australia’s SBS TV, the network could reap up to A$20 million ($18.6 million) in advertising from the event, which has seen Australians secure 41,000 tickets to become the second largest number of overseas buyers behind the United States.

“We’ve had a lot of interest from our clients and we’ve also had that opportunity to go to other companies in other categories because this is such a big event. Something like this brings a nation together, particularly with Australia competing and its first match being in a good timeslot,” SBS sales director Andrew Cook told the Australian Financial Review.

Across the region, Hong Kong, Malaysia and Singapore are the only countries restricting the event to subscription audiences, with the latter also reportedly the most expensive.

While fans visiting Brazil can at least anticipate “an exotic beach holiday,” the region’s growing economic clout will still see it represented commercially until the final day, even if its footballers have long since departed.