Developed markets rose anew, with the “safe” haven spread favoring U.S. smallcaps over large caps continuing to surge into option and futures expiration week. Chinese IPOs debuted mixed, with some spectacular openings being followed by big declines of selected deals.
IPOX Global Indexes Action:
- The IPOX Global Indexes rose on the week, with the IPOX-100 Global (IPGL100) gaining just +0.15%, continuing to underperform benchmarks MSCI World (MXWD: +0.56%) and S&P 500 (SPX: +1.28%). 47/100 companies in IPGL100 rose, with the average (median) equally-weighted constituent rising +0.33% (+0.26%), in line with the applied market-cap weighted index.
- In IPOX Global Sectors, the “red hot” Consumer Discretionary sector (+-1.95%) fell anew on declines in Chinese-linked consumer stocks with Anta Sports (2020 HK: -7.53%) and Belle (1880 HK: -4.56%) in focus. Firms conducting recent secondary offerings, such as Dollar General (DG US: -7.06%) or L’Occitaine (973 HK: -3.79%) fell, while dividend heavy European utilities rose sharply.
IPOX Regional Indexes Action:
- Focus amongst the IPOX Regional Indexes was on the the IPOX U.S. (IPXO) universe, while IPOX Europe (IXTE) extended recent relative gains:
- Amid one of this year’s biggest trade - favoring the Russell 2000 (RUT) over the S&P 500 (SPX) - the IPOX-100 U.S. FPX displayed again powerful risk-adjusted returns (+1.33% to +17.45 YTD). Heavy yield-related buying in European utilities such as Suez Environment (SEV FP: +5.75%), EDP Renovaveis (EDPR PL: +6.95%) and Iberdrola Renewables (IBR SM: +7.68%) pushed the IPOX Europe universe to a second week of exceptional relative performance.
Initial Action in global IPOs:
Table 2: Select Global IPOs (priced): Some Big returns
Return over IPO
Targa Resources Corp
Bona Film Group Ltd
Sateri Holdings Ltd
Bumi Resources Minerals
First Republic Bank
Pola Orbis Holdings Inc
China ZhengTong Auto
Gjensidige Forsikring ASA
Flybe Group PLC
- 43 global IPOs priced last week, with the average (median) non-China A share IPO (31 IPOs) gaining +20.90% (+8.00%). Bona (BONA US: -18.12%) and Sky-mobi (MOBI US: -25.00%) took advantage of an extraordinary “window of opportunity” opened by big openings in E-Commerce China (DANG US: +104.94%) and Goldman Sachs-led Youku.com (YOKU US: +192.97%) earlier in the week by pricing their deal at the top or above the initial range.
Upcoming global IPOs – China and Japan in focus:
Table 3: Select Global IPOs (expected)
Walker & Dunlop Inc
BG Medicine Inc
Gain Capital Holdings
MIE Holdings Corp
Otsuka Holdings Co
World Wide Touch
In developed Asia-Pacific markets, our focus is on Wednesdays debut of Otsuka Holdings Co. (4578 JP), Japans largest privately owned drugmaker.
- A large number of IPOs fill the deal calendar in the U.S., Japan and Hong Kong: We expect strongest initial interest for tech-related deals (ISS US, RNET US), underpinned by continued takeover activity amongst recent tech IPOs and a strong Russell 2000. We expect the large “old economy” Hong Kong IPOs (3618 HK and 1798 HK) to receive a muted reception.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: The IPOX Indexes and related instruments may be long and short aforementioned companies.