Investors Bet on Olympic Construction Boom

TOKYO — Ever since a group of out-of-work samurai pooled their pensions to found Onoda Cement 130 years ago, the company has had its ups and downs: industrialization, a crippling war, Japan’s postwar economic miracle.

But after domestic cement demand peaked in 1990, at the height of Japan’s bubble economy, Taiheiyo, the successor company, and the industry, fell into a seemingly permanent decline in a mature and shrinking Japan.

Tokyo’s victory on Saturday in the race to host the Summer Games for a second time, in 2020, is giving Taiheiyo a new lease on life.

On Monday, a day after Japan reveled in the good news, the stocks of general contractors, property developers and other long-suffering construction-related companies surged in Tokyo, as investors anticipated a construction boom before the 2020 Olympic Games.

Construction companies helped lead a 2.48 percent rise in the Nikkei index to 14,205.23, a one-month high. Taiheiyo’s stock jumped more than 7 percent to its highest level in six years, while Taisei, the contractor that built Tokyo’s Olympic Stadium in 1964, soared 14 percent. Both stocks continued their rapid ascent Tuesday morning.

“We expect Tokyo’s success in bidding for the Olympics to become a very positive catalyst” for Japanese stocks, Hiromichi Tamura, a strategist at Nomura, said in a note to clients.

Helping to elevate shares was a revision of Japan’s second-quarter economic growth figures to an annualized rate of 3.8 percent on the back of strong capital investment. Preliminary estimates had shown growth of 2.6 percent.

The government estimates that hosting the Olympics will increase the economy by 3 trillion yen over the next seven years, or 0.3 percentage points of Japan’s economic growth a year.

But that estimate is too modest, Robert Feldman, head economist for Japan at Morgan Stanley MUFG Securities, wrote in a report last week.

He said that the impact would most likely reach 6 trillion to 8 trillion yen over the next seven years, or 0.7 to 0.8 percent of gross domestic product.

The most visible impact will be in construction. Tokyo has promised to keep costs down by using as many as 15 “legacy” buildings, including three built for the 1964 Games. Still, it will build 22 more sites at an estimated cost of $3.1 billion.

Tokyo’s huge new Olympic Stadium, called the cycling helmet for its space-age design, will seat 80,000 people and cost at least $1.3 billion to build. It will feature a retractable roof – a first for an Olympic Stadium. The city also plans to spend $955 million on a waterfront Olympic Village complex capable of housing 17,000 athletes and trainers.

Naoki Inose, the governor of Tokyo, has called the project “Tokyo’s biggest housing development in decades.”

Investors hunted for more Olympics-related shares. Advertising and travel agencies gained on Monday, as did Japanese sports equipment makers, like Mizuno and Asics.

Sagami Rubber Industries, which says it makes one of the world’s thinnest condoms, with a thickness of only 0.022 millimeters, jumped more than 8 percent during Monday trade, and continued to climb Tuesday. Condoms have been distributed to Olympics athletes since the Seoul Summer Games in 1988. Last year, the London Games distributed more than 150,000 condoms to athletes, according to British media reports.

Taiheiyo Cement is also poised to be one of winners of the Olympic rally.

Analysts at Nomura said that building the stadiums for the Games would require more than three million tons of cement in 2016 through 2019. And total demand for cement could be even greater, as hopes for a tourist influx before the Games prompt developers to plow money into hotels and other commercial projects.

The tide is already beginning to turn at Taiheiyo, as it taps reconstruction demand after Japan’s tsunami and nuclear disasters.

For the fiscal year through March, Taiheiyo’s net profit surged 44 percent from a year earlier to 11.3 billion yen, or $114 million, and the company expects an additional 14.7 percent increase this year, to 13 billion yen.

But how long will an Olympics-fueled rally last? Strategists at Nomura, who studied market patterns after past Olympic announcements, are optimistic. Their analysis shows that stock markets tended to perform well over the longer-term after a successful Olympics bid.

“Once strong investor interest in Olympics hosting-related stocks wanes, the stock market as a whole appreciates,” Mr. Tamura said.

Olympic Wheel of Fortune

Instead, on Sunday, Sept. 8, you’ll see the leaders of three sports federations — wrestling, squash and baseball-softball, which combined last year — presenting finely honed sales pitches to the 104 members of the International Olympic Committee. After each 20-minute spiel, there will be 10 minutes of questions and answers. At some point, the committee members will test their electronic voting equipment with an irrelevant warm-up question. (The group was once asked to choose a favorite of three oceans; the Atlantic won.) Then the members will decide a matter of genuine import: Which of these sports will join the Olympic Games in 2020?

It will be the culmination of a contest that began two years ago and has cost the finalists millions of dollars. But for the winner, the prize is so big that it’s hard to value. Actually, part of it can be valued. Every sport gets a cut of the money generated by the Games’ broadcast and revenue deals, with each share determined by the sport’s popularity, measured by the number of spectators, television viewers and other factors. The pot to be divvied up for sports in the London Games last year is $520 million.

More important, the sport gets the global exposure of billions of television and online viewers and a place in the sports pantheon in which countries worldwide invest, simply because the sport is part of the Olympics. Suddenly, there are youth leagues and commercial endorsements. Medals are at stake, and with them a chance to burnish national self-image.

“The U.S. is a special case because, unlike most countries, it doesn’t have a direct federal government program for sports,” says Michael Payne, the I.O.C.’s former marketing director. “But look at Turkey. It’s currently spending $500 million a year on sports development, and all of that money goes to Olympics-related sports. You’re either at the table or you’re not.”

In the United States, the imprimatur of the Games means universities pay attention. A few years ago, it was hard to find a college team in women’s beach volleyball. The sport is now an Olympics favorite, and there are about 34 college teams, says Doug Beal, the chief executive of USA Volleyball.

“It’s impossible to overstate how significant it is to be included in the Olympics,” Mr. Beal says. “Participation has increased by a factor of 100 or 200. We’ve got high-performance camps, a national junior tour. The Olympics drives kids’ interest. They see it on TV, they identify with the medal winners and they want to play that game.”

This is squash’s third attempt to enter the Olympics, which has capped the total number of sports at 28, and it is the only sport among the finalists that has never been in the Games.

For squash’s ardent fan base, this is more than a little confounding. Every four years, when synchronized swimming scissor-kicks its way onto the world stage, squash aficionados ask: If that sport is in the disco, how long will squash be stuck behind the velvet rope?

Not much longer, if Mike Lee has his way. He is chairman of Vero Communications, a sports lobbying consulting firm that is part of a small but growing industry for campaigns like this. Mr. Lee, a onetime political consultant who is based in London, was hired by the World Squash Federation to oversee its Olympic bid. Among Vero’s recent achievements is guiding rugby sevens into the 2016 Olympics in Rio de Janeiro. Squash was one of the sports that rugby sevens bested.

Working in politics and Olympic sports is not that different, Mr. Lee said. Both need compelling narratives and both need to cater to voters. The squash narrative, as framed by Vero, is all about the game’s global reach, its embrace of innovation and its easy integration into the Games — the event would involve just 64 players from around the world, 32 men and 32 women, in a glass court that could be built anywhere.

“In the final stage of this, we’re also giving a push to the very salient and important point that squash is the only truly new sport in terms of the Olympic program,” Mr. Lee said. “That will feature significantly in our final presentation in Buenos Aires.”

What exactly is the Olympics looking for? The I.O.C. has a dauntingly long list of 39 criteria. The sport should offer gender equity (medals to men and women in roughly equal numbers), excellence around the world (as opposed to a few countries) and popularity among fans and sponsors. Ease of broadcasting the sport is another factor, along with the cost of building a place for competition. There is also the vague but all-important “value added,” defined as “value added by the sport to the Olympic Games; value added by the Olympic Games to the sport.”