Last Week In Global IPOs: Opportunities In China-Linked Stocks Outside Benchmarks

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 |  Includes: DG, FRAN, GM, IFXAF, KIOR, KMI, PM, SCHYY, TUMI, UBNT
by: Josef Schuster

SUMMARY:

Ahead of key U.S. futures & option expiration, stocks rose on big short covering in U.S. and European benchmark stocks on signs of further global stimulus. With IPOX trading well-supported, global IPO activity remained subdued. IPOX China underlines relative potential for China-linked equities.

HIGHLIGHTS:

With Asia-Pacific falling into the week-end, while U.S. equities rose, IPOX Global lags: The IPOX Global 50 (IPGL50), key gauge for the performance of the most significant global IPOs and spin-offs over a four-year rotational cycle, rose +1.80% to +6.93% YTD last week, underperforming benchmark MSCI World (MXWD). Relative performance across the IPOX regional universe diverged significantly. The IPOX U.S. universe (IPXT, IPXO) rose just +2.87% to +10.18% YTD, driven by a more mixed performance of IPOX heavyweights and stocks linked to secondary issuing activity.

For example, while pipeline transportation and energy storage firm Kinder Morgan Inc. (NYSE:KMI) fell, retailer Dollar General (NYSE:DG) closed at yet another post-IPO record. VOLT maker General Motors (NYSE:GM) and consumer staple Philip Morris International (NYSE:PM) traded lackluster versus the market. Some select recent U.S. IPOs fell sharply or lagged anew, with network technology and 10/11 IPO Ubiquity Networks (NASDAQ:UBNT) or alternative energy firm Kior Inc. (NASDAQ:KIOR) recording new post-IPO lows. Strong numbers from Prada and Francesca's Holding (NASDAQ:FRAN) led to a big short-covering rally in the global luxury goods sector with 04/2012 IPO Tumi Holdings (NYSE:TUMI) amongst the beneficiaries.

Relative performance across the developed Asia-Pacific universe (IPTA) remained strong: Despite weakness in the Hong Kong traded casino complex including Wynn Macau (1128 HK: -3.18%) and Sands China, the IPOX Asia-Pacific 30 (IPTA: +1.06%) extended the relative YTD gain versus benchmark MSCI Asia-Pacific (MXPC) by +89bps to +1242bps. Strength in aforementioned Prada (1913 HK: +7.33%) on strong profits and a bounce in Japanese traded stocks in including heavyweight Financial Dai-Ichi Life (8750 JT: +4.07%), cosmetics firm Pola Orbis (4927 JT: +5.99%) and social networker Gree Inc. (3632 JP: +21.05%) contributed to the good showing. A bounce in stocks hit by the European financial crises, including Spanish Financials IPOX heavyweight Caixabank (CABK SM: +14.69%) helped to offset some of the YTD relative losses of the IPOX Europe universe (IXTE, IPXU, JPEU). Notable is the strong performance of China-linked IPOX exposure last week, pointing again to increased risk appetite for China-linked equities which is set to support equities going forward: The IPOX China 20 (CNI: +0.15% to +0.44% YTD) rose last week, while the benchmarks HSCEI (-2.79% to -5.87%) and FTSE Xinhua 25 (OTC:IFXAF), down -2.65% to -7.87% YTD, continued to slump.

Key IPOX Strategies Comparable Returns YTD 2012:

Ticker (BBG/Reuters) Return

5-day

YTD 2012 Name
IPGL50 (USD) +1.80 +6.93 IPOX Global 50
IPGL30 +2.07 +3.62 IPOX Global 30
MXWD +2.88 +0.30 MSCI World
IPXO +2.87 +10.18 IPOX U.S. 100
IPXT +2.63 +10.56 IPOX U.S. 30
SPX +3.73 +5.41 S&P 500
IPXUJPEU (EUR) +4.26 -7.07 IPOX Europe 50
IXTE (EUR) +4.37 -10.47 IPOX Europe 30
SX5P (EUR) +2.64 -3.77 STOXX 50
IPTA +1.06 +8.97 IPOX Asia-Pacific 30
MXPC +0.17 -3.45 MSCI Asia-Pacific
CNI +0.15 +0.44 IPOX China 20
HSCEI -2.79 -5.87 Hang Seng Enterprse
Click to enlarge

Most significant IPOs traded (Week 06/04/12):

Company Ticker Return / IPO (%)
No major
Click to enlarge

A total of 12 global IPOs launched last week with the average (median) IPO gaining +4.11% (-1.08%). IPOs on the Chinese mainland continued to be in focus with another five IPOs commencing trading and recording an average (median) initial gain of +6.84% (-3.50%).

The Week ahead - No significant IPOs - Markets firm

Company Code Country Lead Manager
No major
Click to enlarge

With U.S. equity shorts sharply disappointed by the big relative bounce into the week-end (after big overnight declines in Asia-Pacific markets), U.S. and European benchmarks are set to remain firm after the week-ends announcement of a EUR 120 billion rescue package for the Spanish banking sector. This Friday's Futures and Options expiration should further provide support global stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.