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Summary:
Global equities consolidated last week with big weakness in mainland China as well as profit-taking in the U.S, with technology and overdriven small-caps as the major theme. While mainland Chinese IPOs continued to show a dismal initial performance picture, developed markets IPO activity is set to surge.

IPOX Indexes Highlights:

  • Stocks traded mixed to lower during option expiration week as global risk rose after weakness in mainland China and profit-taking in the outperforming U.S. small-caps and U.S. technology. The IPOX Indexes were not unaffected with the IPOX-30 Global Index (IPGL30), falling by -1.07% to -1.17% YTD. Global large-cap benchmarks S&P 500 (SPX: -0.03%) and MSCI World (MXWD: -0.70%) continued to outperform YTD on momentum driven asset allocation buying underpinned by strength in earnings.
  • 51/100 companies in the broad IPOX-100 Global Index (IPGL100: -1.67%) fell, with the average (median) constituent declining -0.26% (-0.13%), less than the applied market-cap weighted index.
  • Downside risk continued to be in key large-cap South-East Asian IPOs on macroeconomic and inflation concerns with Indorama Ventures (IVL TB: -20.78%), Adaro Energy (ADRO IJ: -13.41%) or Indo Tambangraya (ITMG IJ: -10.93%) amongst the biggest decliners.
  • We follow the sentiment in Zhongsheng Group (881 HK: -8.37%), a leading Chinese car dealer, and the heavily China-exposed General Motors (GM: -4.46%).
  • Upside focus remained on the key and dividend-rich recent European utilities IPOs with Iberdrola Renovables (IBR SM: -8.54%), Enel Green (EGPW: +8.01%), EDP Renovaveis (EDPR PL: +7.90%) and Suez Environment (SEV FP: +5.64%) showing remarkable strength.
Table 2: IPOs Priced (Week 01/17/2011)
Company
Ticker
Return over IPO
Anhui Honglu Steel
002541 CH
2.80%
Anhui Sierte Fertilizer
002538 CH
-8.46%
Changshu Fengfan
601700 CH
-12.97%
Jiangsu Asia Pacific
002540 CH
-15.03%
Shindoo Chemical
002539 CH
-14.14%

  • In the absence of other notable IPOs, IPOs in mainland China continued the dismal performance YTD with the average (median) IPO falling -9.50% (-12.97%) below its offering price on the week. With initial IPO action finally playing catch-up with the weakness in the broad benchmarks, we expect a possibly forced slowdown in mainland China IPO activity in the weeks to come.
Table 3: Upcoming IPOs (Week: 01/24/2011)
Company
Ticker
Day
Lead
Danawa Co Ltd
119860KS
24/01
KI&S
Signal Information
099830KS
24/01
Shinyoung
Anchor Mutual
ANCB US
25/01
KBW
Demand Media Inc
DMD US
25/01
GS, MS
Nielsen Holdings
NLSN US
25/01
JPM, MS
Bluecom Co Ltd
033560KS
26/01
Woori
Powerwell Pacific
8265 HK
26/01
CIMB
iNtRON Biot
048530KS
26/01
Shinhan
Adecoagro SA
AGRO US
27/01
CS, MS
BCD Semi
BCDS US
27/01
JEFF, STFL
BankUnited Inc
BKU US
27/01
BAML, MS
InterXion Holding
INXN US
27/01
BAML, BCLY
Telefield
1143 HK
27/01
China Merch.
Baofeng Modern
1121 HK
28/01
CMB
LB Semicon Inc
061970 KS
28/01
KI&S

  • Accessible global IPOs are set to return with a vengeance during FED week with at least 15 notable companies across market-cap spectrum set to go public.
  • The pipeline in Asia-Pacific promises five small-cap South Korean companies set for debut in Seoul and three small-cap companies set for debut in Hong Kong. Given the underpinning momentum in Hong Kong and particularly Seoul, we expect the average and median deal to perform well over the short-run.
  • Seven companies from a broad mix of industries are scheduled for debut in the United States, seeking to raise approximately USD 2.7bn: Due to the strong risk-adjusted performance of recent larger private equity-backed IPOs (NYSE:BAH), bank IPOs (NYSE:FRC) and technology IPOs (NASDAQ:NXPI), we expect strong asset allocation-focused buying interest for all of this week’s IPOs with most uncertainty surrounding the IPO of Adecoagro SA.

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 are related investment instruments may be long or short aforementioned companies.

Source: The Week in Global IPOs: Offerings Set to Return With a Vengeance