The IPOX Strategy Indexes continued to benefit most from the decline in global risk and recorded another week of strong relative gains across the index universe. Initial IPO action confirmed the longer-term trend: While U.S. domiciled deals surged, Hong Kong IPOs disappointed anew.
· The IPOX Strategy Indexes extended the relative gains as global risk continued to decline: The IPOX Strategy Indexes closed out the week with a strong note with the IPOX Global 50 (IPGL50) rising by +1.35% to +16.16% YTD, extending the relative YTD gain vs. benchmark MSCI World (MXWD) by +44 bps. to +545 bps. (Relative) performance across the IPOX Regional Strategy universe was solid: In the United States, the IPOX U.S. IPO and spin-off ETF (TICKER: FPX extended the YTD jump by +0.36% to +16.36% with YTD Index spreads vs. benchmark Russell 3000 (ETF: IWV) extending to +700 bps. The IPOX Europe universe recouped last week's relative loss with the IPOX Europe 50 (IPXUJPEU) gaining +0.21% to +9.27% YTD, while the Stoxx 50 (SX5P) dropped. Germany's DAX (DAX) rose slightly. The IPOX Asia-Pacific 30 (IPTA) rose a further +1.82% to +16.65% YTD, outperforming the MSCI Asia-Pacific (MXPC) by +0.42%. Upside focus within IPOX Emerging Markets remained on the big relative momentum in the IPOX Latin America universe (IPXULATT: +0.65% to +27.17% YTD) with the portfolio extending its relative strength vs. benchmark MSCI Latin America (MXLA) to +901 bps.
· The strong performance was driven by some of the key heavyweights including Japanese Financial Dai-Ichi Life (8750 JP: +10.01%) or Visa [(NYSE:V): +2.20%]. Hedge-fund and IPOX heavyweight baby nutrition maker Mead Johnson Nutrition [(NYSE:MJN): +3.32%] closed the week at a record high on enthusiasm over its potential bid for Pfizer's (NYSE:PFE) baby food unit. Japanese/Korean gaming company Nexon (3659 JP: +5.16%) rose against the trend in gaming stocks.
Key IPOX Strategy Indexes Returns YTD 2012:
|YTD 2012 (%)||Name|
|IPGLC (USD)||+1.27||+16.37||IPOX Global Comp|
|IPGL100||+0.84||+15.76||IPOX Global 100|
|IPGL50||+1.35||+16.16||IPOX Global 50|
|IPGL30||+0.97||+14.25||IPOX Global 30|
|IPXO||+0.36||+16.36||IPOX U.S. 100|
|IPXT||+0.43||+13.74||IPOX U.S. 30|
|IXTE (EUR)||+0.22||+7.53||IPOX Europe 30|
|IPXUJPEU (EUR)||+0.21||+9.27||IPOX Europe 50|
|IPTA||+1.82||+16.65||IPOX Asia-Pac. 30|
|IPXUEM||+0.92||+19.43||IPOX Emerging Mkts.|
|IPXUBRIC||+0.99||+22.49||IPOX BRIC 25|
|IPXUCHCP||+0.80||+18.07||Chin IPOX Comp.|
|CNI||+0.46||+15.69||China IPOX 20|
|IPXUCAUP||+4.48||+12.20||China IPOX Comp.|
|IPXULATT||+0.65||+27.17||IPOX LatAm 20|
|IPXK30K (KRW)||-0.85||+1.93||IPOX Korea 30|
Most significant IPOs launched (week 02/20/2012):
|Company||Ticker||Return / IPO (%)|
|SaraminHR Co Ltd||143240 KS||+218.00%|
|Maxvalu Kyushu Co||3171 JP||+1.92%|
|Bazaarvoice Inc||BV US||+37.58%|
|Christine Intern.||1210 HK||-2.5%|
|Proto Labs Inc||PRLB US||+81.25%|
|Xiwang Special||1266 HK||-16.60%|
|Ceres Inc||CERE US||+3.10%|
Last week's initial pricing action once again underlines a big trend persistent since Q3 2011 and the important roles of positive feed-back trader participation in U.S. IPOs: Investors and traders flock to U.S. domiciled deals at the expense of their international (particularly Hong Kong) counterpart: While IT-linked Bazaarvoice (NASDAQ:BV) and ProtoLabs (NYSE:PRLB) rose substantially above their respective offering price, Chinese Steelmaker Xiwang Special (1266 HK) closed the week sharply below offer.
Week Ahead (2/27/2012): U.S. continues to dominate
|Argos Therapeutics||ARGS US||U.S.A.||Canaccord|
|GCT Semi||GCTS US||U.S.A.||BofA|
|Home Loan Serv.||HLSS US||U.S.A.||BCLY, C, DB|
|Provident Mortgage||PMCA US||U.S.A.||CS, DB|
|Sunshine Oilsands||2012 HK||H.K.||BOCI, DB, MS|
|Yelp Inc||YELP US||U.S.A.||CITI, JEFF|
Amid strong markets, low market risk levels and general IPO enthusiasm ahead of Facebook, we expect continued Q1/Q2 2011-like indiscriminately strong demand for the "average" U.S. domiciled deal in specialty industries. This week's line-up for global IPO investors include U.S. deals such as social networker Yelp Inc. (NYSE:YELP), GCT Semiconductor (GCTS), Home Loan Services (HLSS) and Provident Mortgage (PMCA). While we favor all other U.S. IPOs lined up for the week, Yelp has been gaining most media attention. The company displays much of the characteristics of the "average" small-cap U.S. IPOs, such as a proportional increase of revenue and cost pre-IPO. Notable is a "hidden" revenue/growth warning for its core U.S. market in the prospectus. Sunshine Oilsands (2012 HK) is the only IPO lined up in the struggling Hong Kong IPO market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.