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. (KMI) fell, retailer Dollar General (DG) closed at yet another post-IPO record. VOLT maker General Motors (GM) and consumer staple Philip Morris International (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 (UBNT) or alternative energy firm Kior Inc. (KIOR) recording new post-IPO lows. Strong numbers from Prada and Francesca's Holding (FRAN) led to a big short-covering rally in the global luxury goods sector with 04/2012 IPO Tumi Holdings (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 (IFXAF.PK), 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 |
Most significant IPOs traded (Week 06/04/12):
| Company | Ticker | Return / IPO (%) |
| No major |
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 |
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.
