[miningmx.com] — RUSSIAN steel companies rallied on Thursday on expectation that hosting the 2018 World Cup would fuel a lucrative construction boom, while economists said Moscow’s image among foreign investors should also get a boost.
Fifa awarded the 2018 soccer World Cup to Russia on Thursday, giving it a second major sporting event to look forward to after the 2014 Winter Olympics to be hosted by the Black Sea resort town of Sochi.
The news came after the market close in Moscow, but Russian shares rallied on foreign bourses. The FTSE index of London-listed depository receipts closed up 2.7%, more than doubling earlier gains.
Shares in Russian steel companies led the way as investors looked forward to extra sales to supply the materials needed to build stadiums, roads, hotels and transport links around the country to support the tournament.
Severstal, Russia’s biggest steelmaker, closed up 5.2% in London, its biggest single-day jump since September.
U.S-listed Mechel was up 6% at to six-month highs, while Evraz climbed more than 5% and NLMK jumped 7% in London.
The World Cup is a “major boost for construction and steel sectors”, Dmitry Somolin, analyst at Uralsib, said in a note.
“As Russia’s two largest producers of long – construction – products, we believe Evraz and Mechel stand to benefit the most from the state’s spending on the World Cup,” he added, noting that MMK could also cash in thanks to its high exposure to the domestic market.
The Fifa decision could also prompt more foreign investment in Russia – as already seen in Sochi ahead of the Olympics – and could help boost the country’s image, which has been clouded by concerns over corruption, property rights and the power of the government.
“It is probably good for Russia – the fact that such a respected organisation as Fifa has decided to stage the championship in Russia, probably means things are not as bad as may seem,” said Anton Nikitin, economist at Renaissance Capital.
Russia has put forward proposals for 16 stadiums in 13 host cities, budgeting $3.82bn for construction.
Finance Minister Alexei Kudrin said on Thursday that the World Cup would be much less expensive than the Winter Olympics – which officials have said will cost about $8bn but which Russian media has estimated as high as $30bn.
“They will need to build stadiums and infrastructure, that will be an extra stimulus (for the economy). On the other hand it can lead to higher budget spending,” said Egeniy Gavrilenkov at Troika Dialog.
“On the whole, it is undoubtedly positive for the image of Russia, in that the country is fairly closed from the point of view of visa regime, registration. This will create the stimulus for some positive changes.”
