- Summary: Developed markets benchmarks continued to zoom higher ahead of expiration week, shrugging off big weakness in selected emerging markets (China) on inflation jitters. It’s a seller’s market for large U.S. IPOs: With the U.S. IPO market having regained global leadership, key deals managed to price expensively atop of original ranges. No key deals on this week’s calendar.
- IPOX Indexes Action: Global equity index spreads continued to gyrate sharply ahead of option expiration week as the correlation between developed and emerging (China) markets plunged anew. The narrower IPOX Global Indexes were unaffected by the spike in emerging markets risk with the IPOX-30 Global Index (BBG: IPGL30) declining -0.08%, in line with the global benchmark MSCI World (MSCI).
- ETF Focus: FPX nears all time highs: Most upside focus remained on the IPOX U.S. and IPOX Europe universe, with the IPOX-100 U.S. Index (ETF: FPX +1.95%) closing in on its all-time high (Figure 1). Dividend-heavy alternative energy/utilities regained leadership, helping the IPOX Europe universe to trade slightly above benchmarks. While IPOX Latin America and IPOX China A Shares recovered some YTD losses, accessible China (HK) continued to plunge sharply, with the IPOX China Composite Index (IPXUCHCP) dropping -5.30%.
- Initial IPO Action: 12 global IPOs commenced trading last week, with the average (median) IPO closing the week -1.32% lower (+0.06%) from its respective final offering price. Key large U.S. deals saved the day again, with focus on the strong take-up of “value IPO” Kinder Morgan (KMI US: +5.57%). Amid huge demand (and big overhang) for the MLP-like firm, the deal priced on top of the original range, indicative of frothy U.S. market conditions. No key deals on this week’s calendar.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.