December 6, 2010

Emerging Markets See Victory in FIFA’s Russia, Qatar World Cup Play

Van Eck’s Market Vectors funds include Russian ETF, Gulf States index

With the  Fédération Internationale de Football Association (FIFA) announcing Dec. 2 the locations of the World Cup in 2018 and 2022, investors who have been thinking about putting their money on Russia and Qatar may want to place their bets now.

The newly announced hosts of the world’s largest sporting event—Russia will handle the 2018 soccer match while Qatar is on tap for 2022—will likely see a boost to their national economies as a result of the hordes of fans who visit, according to investment analyst Ed Kuczma for the New York-based Van Eck Emerging Markets Fund.

“FIFA looks almost like a supernational wealth fund like the International Monetary Fund, like a semi-political organization looking to develop these economies,” Kuczma said. “What these games do is make a push for modernization within these economies and development of infrastructure. It really has a long-lasting impact.”

Van Eck sells a Market Vectors family of exchange-traded funds, which includes a Russia ETF (RSX, AUM: $2.3 billion) and a Gulf States Index ETF (MES, AUM: $14 million). As a firm, Van Eck Global manages $29 billion in assets.

“We look at the emerging markets as a growing and important part of the global economy in the last decade,” said Ed Lopez, marketing director and product manager for Van Eck’s ETFs. “A lot of them have taken steps to improve their economies with better policies and better balance sheets.”

Russia beat out bids by England, Spain-Portugal and Belgium-Netherlands, and Qatar topped a U.S. bid. Kuczma pointed out, however, that South Africa this year proved that emerging nations are just as able to host the World Cup. And, he added, soccer-mad Brazil has been tapped to host the event in 2014.

“The decision to go into Russia and Qatar was definitely a surprising one for most people, but I think they are up to the challenge,” Kuczma said. “When you think of Qatar and Russia, given the political history and geographical location, they are not the most stable of regions. FIFA is looking to challenge the way countries host these events.”

To be sure, both countries will now make a huge push to build hotels, redesign airports and modernize roadways. Security will certainly be a concern, as well, especially considering Qatar’s location in the Middle East. A highlight of this flurry of infrastructure activity will revolve around Qatar’s construction of nine stadiums in a country where temperatures can reach a high of 122 degrees Fahrenheit.

“Qatar is going to build the most state-of-the art solar-powered, air-conditioned stadiums you can imagine. They want to keep their carbon footprint for as low as possible. I’m excited to see it,” Kuczma said.

He added that Qatar, which is the second-wealthiest nation in the world largely due to its oil and gas reserves, will dismantle its newly built stadiums after the 2022 World Cup is over and send the pieces to other emerging nations.

Read about Adidas’ sponsorship of U.S. soccer at AdvisorOne.com.

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