Global Investing

The world’s leading ad agencies are positioning themselves  in Brazil, Russia and China — countries that are expected to provide almost a third of the growth in global advertising over the next three years. That’s according to a report by S&P Capital IQ Equity Research, a unit of publishing giant McGraw Hill.

Most major advertisers already have a foothold in these BRIC economies, where the advertising market is projected to grow by an average 10.7 percent  a year over the next three years — more than three times the growth rate in  the developed world.  Over the next 15 years,  big emerging markets will add $200 billion to the global ad spend, S&P Capital IQ reckons.

Hopes, unsurprisingly, are pinned on the soccer World Cup in 2014 and the 2016 Olympics, both hosted by Brazil. Russia hosts the 2014 Winter Games in Sochi and Football World cup in 2018 and both these events are expected to boost ad spending. The behemoths of the ad world have prepared for this, says Alex Wisch, an analyst at S&P Capital IQ:

    The global agencies have already developed a solid foundation in the BRICs, so the heavy lifting on the investment ramp is largely behind them.

(Graphic under creative commons)

Accordingly, S&P Capital IQ has a ‘buy’ recommendation on advertising agencies Publicis, Interpublic and Omnicon while advising a “hold” on WPP.

How quickly times change. Russia’s stock market, unloved for months, last week overtook India to be the best-performing of
the four BRICs.  The Moscow stock index jumped 5 percent last week, posting its biggest weekly rise in seven months, bringing
year-to-date gains to 17.5 percent. Fund managers such as Goldman Sach’s Jim O’Neill, creator of the BRICs term, are predicting it will lead the group next year too.

So what’s with the sudden burst of enthusiasm for Moscow? One catalyst is of course soccer body FIFA’s decision to award
the 2018 Soccer World cup to Russia. Investors are piling into infrastructure stocks, with steel producers especially tipped to
benefit as Russia starts building stadia, roads and hotels.  But the bigger factor, according to John Lomax, HSBC‘s head of emerging equity strategy, is the optimism that has started creeping in about U.S. — and world economic growth.

Some of that may have been dampened by Friday’s lacklustre U.S. jobs data. But overall, checks of U.S. economic vital signs show the economy looking sturdier than it was six months ago and most banks, including the pessimists at Goldman Sachs, have upped 2011 growth forecasts for the world’s biggest economy. And China and India are continuing to grow at rates close to 10 percent.  All that is great news for the commodity and oil stocks — the mainstay of the Russian market. Merrill Lynch, for instance, expects oil prices to be $10 higher by next December than now.

After the collapse of Northern Rock, AIG and XL group – which sponsored Newcastle United, Manchester United and West Ham respectively — the curse of English football is getting stronger.

Today Iceland’s Landsbanki went into receivership. Its chairman Björgólfur Gudmundsson owns West Ham football club.

In November 2006, Gudmundsson, Iceland’s second richest man, led an 85 million pound buyout of the east London club in November 2006, investing another 30.5 million pounds in December 2007.

Former Thai Prime Minister Thaksin Shinawatra sold his Manchester City football club to an Abu Dhabi-based company having gone into exile in London in August on corruption charges.