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Summary:

The IPOX Indexes closed markedly higher last week on a broad rally in all China-linked markets, while U.S. index spreads diverged on renewed jitters surrounding U.S. banking. With U.S. domiciled IPO pricing action disappointing, renewed focus was on the big resurgence in China-linked IPO activity.

IPOX Indexes Highlights:

  • The IPOX Indexes optimally tracked the powerful dynamics in global equities last week, benefiting from the surge in China-linked markets, while being unaffected from rising downside risk in U.S. Financials.
  • The key IPOX-100 Global Index (IPGL100) gained +2.67% to +6.08% YTD, outperforming benchmarks S&P 500 (SPX) and MSCI AC World (MXWD) by 144 bps. and 172 bps, respectively.
  • 69/100 stocks in IPGL100 rose, with the average (median) equally-weighted constituent adding +1.86% (+1.72%), less than the applied market cap weighted index.
  • IPOX Global Financials (+3.21%) continued to be the top performing global IPOX Sector Portfolio as broad asset allocation buying of Chinese banks and Property developers met short covering by U.S. hedge funds.
  • Most key regional Indexes outperformed strongly last week with continued focus on the big surge in the IPOX-30 Asia-Pacific Index (IPTA), which rose for yet another week, extending its YTD gain by +3.43%% to +22.89%. IPTA gained despite weakness in JP social networker Gree Inc. (3632 JT: -8.32%) and Aozora Bank (8304 JT: -4.48%).
  • With the IPOX Latin America 20 Index (IPXULATT: +3.40%) surging on the back of popular Brazilian Mid-Caps, focus within the IPOX Emerging Markets Index was without doubt on the spike in the IPOX China 30 A Share Index (IPXUCAUP). The index, currently pooling USD 410.31bn of float-adjusted market-cap, rose +15.57% to -5.54% YTD, trouncing the benchmarks. The index benefited from a big rise in recent IPO China Everbright (601818 CH: +30.32%), amongst other companies.
IPOX-linked Fund Feature - The Direxion Long/Short Global IPO Fund (DXIIX):

DXIIX - run by Josef Schuster - continues to display powerful returns since its March 1st launch: Gaining +3.87%, the fund trades at a beta of just 0.19 and has displayed a negative correlation of -0.47 vs. the S&P 500 (Sharpe ratio: 0.92).

Initial Action in global IPOs – It’s all about Hong Kong:

Table 1: Key Global IPO Pricings (last week)

Company
Ticker
Return over IPO
Body Central Corp
(BODY) US
0.00%
Tower International
(TOWR) US
0.00%
Wealth Glory
8269 HK
60.00%
China Suntien Green
956 HK
-0.75%
Mongolian Mining
975 HK
16.81%
Sun King Power
580 HK
26.94%
Great Harvest Maeta
3683 HK
0.00%
Kosmopolito Hotels
2266 HK
-6.82%
Winsway Coking
1733 HK
-0.54%

  • 28 global IPOs priced last week, with the average (median) IPO closing +15.49%(+5.06%) higher. 15 companies raised funds in HK and mainland China, while 6 companies went public in India.
  • Initial Reception to the two U.S. IPOs was disappointing, demonstrating yet again the confounding dynamics within U.S. IPO markets in the run-up to the all-important GM IPO. (Netspend tentatively rescheduled for this week on rumors re: its relationship with its card issuing bank – underlying GDOT’s advantage)

Upcoming global IPOs – Larger deals abroad:

Table 2: Global IPO Deal Flow expected (week)

Company
Ticker
Day
Lead
ShangPharma Corp
SHP US
19/10
CITI, JPM
TAL Education Group
XRS US
19/10
CS, MS
Boer Power Holdings
1685 HK
20/10
CCB, UBS
Bravo Brio
BBRG US
20/10
JEFF, PJC
HRT Participacoes
HRTP3 BZ
21/10
CITI, CS
IRC Ltd
1029 HK
21/10
BAML
Springland
1700 HK
21/10
DBSA, MS
Betfair Group Ltd
N/A LN
22/10
GS, MS
Netspend Holdings
NTSP US
22/10
BAML, GS
Statoil Fuel & Retail
SFR NO
22/10
CITI
Vera Bradley Inc
VRA US
22/10
PJC, RWB
  • A number of interesting global IPOs are lined-up, including UK domiciled Betfair Group, Norway’s Statoil Fuel & Retail (SFR NO) and HK Boar Power (1685 HK).
  • Expect solid initial returns to the upcoming list of U.S. (small-cap) IPOs, including China-domiciled TAL Education. A strong following by regional investors looks to lift specialty upmarket hand bag maker Vera Bradley (VRA US).

Disclosure: FPX, DXIIX may be long or short respective companies mentioned.

Source: The Week in Global IPOs: Global Deals Abound