The Week in Global IPOs: and Rusal Lead Rebound in Russian Deals

 |  Includes: DPS, FPX, GM, JBSAY, MJN, NXPI, OSN, PM
by: Josef Schuster

Stocks rose as asset-allocation-driven buying in the benchmarks continued. While the IPOX Regional Indexes performed well, IPOX Global continued to lag. Global IPO deal flow centered around IPOs in emerging markets with accessible China IPOs disappointing anew.

IPOX Global Indexes Action:
  • The IPOX Global indexes rose ahead of the Christmas holiday but lagged the global benchmark indexes. The IPOX Global 100 Index (IPGL100), the global IPO and spin-off performance barometer, rose +0.81%, underperforming benchmarks S&P 500 (SPX) +1.12% and MSCI World (MXWD) +1.28%. 51/100 in IPGL100 gained on the week, with the average (median) equally-weighted constituent adding just +0.44% (+0.12%), less than the applied market-cap weighted index.
  • In IPOX Global Sectors, IPOX Global Consumer Staples trended weakest as funds continued to allocate away from IPOX heavyweights, low risk and dividend-heavy Philip Morris International (NYSE:PM): -1.71%, Dr. Pepper Snapples (NYSE:DPS): -4.56% or Mead Johnson Nutrition (NYSE:MJN): +1.75%. JBS SA (OTCQX:JBSAY): +8.14%, the world’s largest, highly indebted meat producer, rose against the trend on renewed speculation over the IPO of its US unit after positive US sales figures. IPOX Energy, IPOX Industrials and IPOX Information Technology were the best performing sectors on big gains in Indonesia’s Adaro Energy PT: +9.78% and another great week for NXP Semiconductors (NASDAQ:NXPI): +10.93%.
  • This year’s key Russian IPOs performed strongly: While HK-traded Aluminum producer United Co. Rusal: +14.29% continued to benefit from speculation related to the launch of aluminum-based ETFs pushing its share finally through its IPO price and others, recent technology IPO +3.06% added gains on increasing pre-IPO valuations for Facebook, one of its technology investments.
IPOX Regional Indexes Action:
  • All IPOX Regional indexes traded in line with the benchmarks. Notable was the strong risk-adjusted performance in the IPOX U.S. universe (NYSEARCA:FPX): +1.41% to +17.22% YTD which – despite its +26.92% holding in U.S. technology stocks – managed to substantially outperform the NASDAQ-100 (NDX): +0.55%. Ahead of the suspected slew of potential “buy” ratings initiations early in the New Year and lock-ups expiring Jan. 16, 2011, General Motors (NYSE:GM): +2.38% rose strongly.
  • The IPOX-30 Asia-Pacific index (IPTA): +0.70% to +26.25% YTD remained IPOX’s best performing index in 2010. The index focuses on exposure to IPOs and spin-offs of companies with a dedicated domicile on a developed market and exchange in the Asia-Pacific region.
IPOX-linked products: Sources of uncorrelated Returns
T 1: Performance of IPOX-linked products
Week (%)
Corr vs. S&P
Corr vs. DXIIX
Click to enlarge
  • For long-only investors, the IPOX-linked First Trust U.S. IPO Fund (FPX): +1.42% to +17.22% YTD has displayed powerful asset allocation properties since its launch: It has historically been able to capture a return profile similar to the Russell 2000 (RUT) and NASDAQ-100 (NDX) with exposure (sector breakdown) and risk (Beta) similar to the S&P 500 (SPX).
  • For (alternative) long/short investors, the IPOX-managed Direxion Long/Short Global IPO Fund (DXIIX): -0.19% to +7.58% YTD has been effective in providing competitive returns at a negative correlation and low risk when compared to the long-only benchmarks and incumbent Long/Short funds.
Initial Action in global IPOs:
T 2: Select Global IPOs (priced): China Mixed
Return over IPO
Ossen Innovation Co
PAX Global Tech
327 HK
Raia SA
Changsha Zoomlion
1157 HK
Hengxin Technology
1085 HK
Daegu City Gas Co
117580 KS
Click to enlarge
  • 23 global IPOs priced last week, with the average (median) non-China A share IPO (18 IPOs) gaining +13.04% (+6.67%).
  • The average (median) IPO on the mainland China IPO market rose +40.77% (+31.07%) - capping a historical year for the development of Equity Capital Markets in the China A-share market. The IPO investor in a China-linked IPO company going public abroad was less fortunate: His average (median) investment yielded just 0.00% (-1.90%) last week.
  • Brazil’s drugstore chain Raia SA (RAIA3 BZ: +5.56%), largest IPO during last week, debuted strongly.
Upcoming IPOs: No notable deals – Motorola watch:
  • No notable IPOs are scheduled for this week. We watch with interest trading in MOT spin-off Motorola Mobility Holdings (MMI) ahead of its separate listing and inclusion in the S&P 500 effective Jan. 3, 2011.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: IPOX-linked products available to investors may be long or short aforementioned companies.