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 (BAH), bank IPOs (FRC) and technology IPOs (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.
