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Summary:
During the week which marked a big return of U.S. domiciled IPOs, developed markets were de-facto insulate from the big gyrations in emerging-markets-risk enforced by economic developments related to domestic China. While U.S. IPO activity is now seasonally quiet, key foreign IPOs line up.

Highlights:

IPOX Global Indexes Action:

  • The IPOX Global Indexes continued to consolidate, driven by further weakness in key emerging markets constituents. The IPOX-100 Global Index (IPGL100) fell for a second week, losing -1.05% to +4.86% YTD, underperforming benchmarks MSCI World (MXWD: -0.18%) and S&P 500 (SPX: +0.04%). 58/100 companies in IPGL100 closed the week in negative territory, with the average (median) equally-weighted constituent losing -0.44% (-1.03%), less than the applied market-cap weighted index.

  • Relative weakness was driven by downside gyrations in Chinese Financials after a round of profit taking in Evergrande (3333 HK: -7.09%) or Sino-Ocean (3377 HK: -5.18%). With Goldman Sachs reducing its stake, ICBC (1398 HK: -7.68%) underperformed the weak Chinese banking stocks. We note the continued good performance of this year’s “unloved” private equity-backed IPOs with Europe’s Kabel Deutschland (KD8: +6.93%) and Amadeus IT Holdings (AMS SM: +2.25%) advancing strongly.

IPOX Regional Indexes Action – U.S and Asia-Pacific lead:

  • Upside focus remained on the continued positive performance of the IPOX U.S. and (developed) Asia-Pacific universe: Driven by another solid week in IPOX heavyweight Dollar General (DG: +6.69%) and earnings-related surge in selected small-caps such as Accretive health (+29.18%), the IPOX-100 U.S. (ETF: FPX: +0.61% to +12.53% YTD) outperformed the benchmarks at lower risk. Another good week in Japan with beleaguered IPOX heavyweight Dai-Ichi Life (8750 JT: +4.26%) extending its recent gains, helped the IPOX-30 Asia-Pacific Index (IPTA: +0.12% to +25.29% YTD) to trade insulated from the big weakness in the Hong Kong market.

Direxion Long/Short Global IPO Fund (DXIIX) update:

  • The IPOX-run fund continued to gain, rising +0.37% to +7.23% since its 03/01/2010 launch. The vehicle trades at powerful statistical properties, such as a correlation of -0.43 vs. SPX, -0.28 vs. MXWD and a Beta of 0.20

Initial Action in global IPOs – HK IPOs plunge:

Table 1: Select Global IPOs (priced)

Company

Ticker

Return over IPO

Bitauto Holdings Ltd

(BITA) US

+0.42%

Booz Allen Hamilton

(BAH) US

+14.29%

HL Technology Group Ltd

1087 HK

-16.43%

Leoch International

842 HK

-19.81%

General Motors Co

(GM) US

+3.82%

LPL Investment Holdings

(LPLA) US

+7.17%

Shirble Department

312 HK

-11.82%

Aeroflex Holding Corp

ARX US

+0.00%

CITIC Dameng Holdings

1091 HK

+3.64%

China Rongsheng Heavy

1101 HK

-0.50%

  • 24 global IPOs priced, with the average (median) non-A share IPO (17 IPOs) gaining just 2.89% (0.42%). With Chinese A Share IPOs rising +36.15% (median: +18.69%), we note the big slump in HK listings with 4/6 deals (and all key deals) closing the week below its offering price. Having been shunned by U.S. investors for much of the year, U.S. domiciled IPOs debuted successfully, highlighted by the landmark GM offering (GM US: +3.82%) and other private equity/capital structure deals such as Booz Allen Hamilton (BAH US: +14.29%) and LPL Investments (LPLA US: +7.17%).

Upcoming global IPOs – U.S. quiet, key foreign deals:

Table 2: Select Global IPOs (expected)

Company

Ticker

Day

Lead

QR National

QRN AU

11/22

All Major

Nickel Asia Corp

NIKL PM

11/22

CLSA,UBS

China Xiniya Fashion

XNY US

11/23

Cowen & Co

Syswin Inc

SYSW US

11/23

MS

Goodbaby

1086 HK

11/24

MS

Mewah International

MII SP

11/25

CS

Brilliance Worldwide

8312 HK

11/25

VC Brokerage

Kingworld Medicines

1110 HK

11/25

Guotai Junan

Borneo Lumbung

BORN IJ

11/26

CIMB

China Modern Dairy

1117 HK

11/26

CITI,UBS

Petronas Chemicals

PCHEM MK

11/26

CIMB,DB,MS

  • Amongst large deals, the upcoming listing of Australian rail freight operator QR (QRN AU), Philippines Nickel Asia Corp (NIKL PM) and Malaysia’s Petronas Chemicals (PCHEM MK) present interesting diversification opportunities. While QRN AU and NKL PM priced at the low end, PCHEM MK priced at the top end of the respective ranges. Amid strong interest, small-cap Chinese baby-stroller maker Goodbaby (1086 HK) priced at the top end. China Modern Dairy (1117 HK) priced low, following the weakness in recent Yashili (1230 HK: -20.3% off its IPO price). During seasonally quiet U.S., focus is on China-based Syswin (SYSW US), another risky China ADRs we expect to do well - initially.

Disclosure: The IPOX Indexes and respective fund vehicles may be long or short aforementioned companies.

Source: The Week in Global IPOs: U.S. Domiciled IPOs Return, Hong Kong IPOs Plunge