The Week In Global IPOs: Global IPOs Spring Back To Life

Includes: EQM, EXA, NOW, TSRO
by: Josef Schuster


Global equities rallied towards quarter end on a big shift in risk appetite following solid Asian-markets and European political action. Much Ado about nothing: Global IPO sprang back to live with the solid debut of deals across global regions. Focus on Hong Kong IPOs during the upcoming week.


Key IPOX Indexes rise and trade mixed during Q2:

The IPOX Global 50 (IPGL50), key gauge for the 'going public' effect of the most significant global IPO's and spin-offs over the past four years, rose +0.83% to +8.23% YTD, lagging global benchmarks during the week and quarter, but remaining +402 bps ahead of benchmark MSCI World (MXWD) YTD. While IPGL50 is heavy in Hong Kong stocks yet to appreciate on Friday's huge rally, the key IPOX Long-only strategy returns varied sharply across the global regions yet again: Performance across the IPOX U.S. universe remained solid with the narrow IPOX U.S. 30 (IPXT) remaining +543 bps. ahead of the S&P 500 (SPX) YTD. A big drag following another disappointing week in IPOX heavyweight U.S. carmaker General Motors (GM: -4.27%) was mitigated by a big jump in U.S. hospital operator HCA (HCA: +15.92%) as the U.S. supreme court upheld Obamacare. European IPOs and measured in the IPOX Europe universe lagged anew: Amid continued weakness in global miner and May 2011 IPO Glencore International (GLEN LN: -5.47%) on the Xstrata merger uncertainty, the IPOX Europe 50 (IPXUJPEU) rose just +0.50% to -10.75%, lagging benchmark STOXX 50 (SX5P) anew. Despite the big volatility across Asian-Pacific markets during the quarter, relative performance across the Developed Asia-Pacific universe (IPTA) remained remarkably strong: While benchmark MSCI Asia-Pacific (MXPC) declined by -6.89% on during the past quarter, the IPOX Asia-Pacific 30 (IPTA) declined -5.69% and closed the quarter with a YTD gain of +13.96%. Relative weakness in the lackluster casino complex was mitigated by a big jump in Japan-traded real-estate developer Hulic Co. (3003 JT: +25.21%). The IPOs of European consumer goods IPOs 'going public' in H.K. in 2010/2011 continued to trade well: While Italian fashion group Prada (1913 HK: +3.41%) continues to trade within reach of its all-time high reached after strong earnings on 5/2/2012, French cosmetics group and 2010 H.K. IPOX member L'Occitaine (972 HK: +2.40%) closed the week at yet another post-IPO high. Dedicated China-linked exposure (NYSE:CNI) underperformed developed Asia-Pacific equities last week as uncertainties over the growth path in the mainland Chinese economy remain.

IPOX Long-only Strategy Returns YTD 12:

The Week ahead - U.S. holiday week - H.K in focus:

Company Code Country Lead
China Aluminum 2068 HK CHINA CICCHK
HaiTian Hydropower 8261 HK CHINA Ample Cap
Toba Bara Sejahtra n/a IJ INDO CITI, CLSA
Xiao Nan Guo 3666 HK CHINA GJUNAN

With the U.S. IPO market on holiday, focus is on the resurging H.K. IPO market with at 4 IPOs lined up during the coming week (out of a total of at least 12 during the month of July). We believe that the IPOs of companies related to the construction/energy industry (H-share offering of 2068 HK, 1237 HK and 8261 HK) have less upside when compared to IPOs linked to the Chinese consumer (consumer staples), such as the IPO of Xiao Nan Guo Restaurants (3666 HK), a Chinese restaurant chain. The company seeks to sell 23.14% for around USD 73m to repay debt and grow the company. The January 2012 takeover of H.K. traded restaurant chain group and good long-run performer Little Sheet Group (968 HK) provides for an attractive upside bias to the stock at the offer price of HKD 1.50.Most significant IPOs traded (Week 06/25/12):

Company Ticker Return / IPO (%)
China Nonferrous Mining 1258 HK 0.00%
Sajo Seafood Co Ltd 014710 KS -15.94%
Felda Global Ventures FGV MK 19.55%
Huadian Fuxin Energy Corp Ltd 816 HK 3.03%
ServiceNow Inc NOW US 36.67%
Exa Corp EXA US 6.10%
EQT Midstream Partners LP EQM US 14.62%

Much ado about nothing - Global IPO market back in form, shrugging off the Facebook (FB: -5.92%) overhang: Malaysian privatization palm oil producer Felda Global Ventures (FGV MK: +19.55%) and U.S. specialty tech ServiceNow (NOW US: +36.67%) rose significantly, while the respective H.K. "old economy" IPOs traded flat. In total, 12 accessible deals commenced trading with the average (median) IPO gaining a strong +18.55% (+16.13%).

Ticker (BBG/Reuters) Week Q2 12 YTD 12
IPOX Global 50 (IPGL50) (NYSEARCA:USD) +0.83% -8.13% +8.23%
MSCI World (MXWD) +2.46% -6.36% +4.21%
IPOX U.S. 100 (IPXO +0.84% -5.23% +13.33%
IPOX U.S. 30 (IPXT) +0.72% -3.67% +13.74%
S&P 500 (SPX) +2.03% -3.29% +8.31%
IPOX Europe50 (IPXUJPEU) (EUR) +0.50% -10.75% -6.42%
IPOX Europe30 (IXTE) (EUR) +0.30% -12.33% -9.88%
STOXX 50 (SX5P) (EUR) +1.68% -3.16% +0.48%
IPOX Asia-Pacific 30 (IPTA) +2.23% -5.69% +13.96%
MSCI Asia-Pacific (MXPC) +3.19% -6.89% +2.57%
IPOX China 20 +0.46% -8.97% -0.53%
Hang Seng Enprs. (HSCEI) +0.74% -10.01% -3.64%

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