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The IPOX Week (09/19/2011): H.K. kicks off new IPO cycle for accessible deals !!!

SUMMARY:

U.S. and European equities surged at the expense of Emerging and Asian markets during option expiration with a decline in global risk and a big rally in U.S. technology cementing positive momentum. While a new global cycle for accessible deals starts in the embattled H.K. market, the IPOX Indexes traded mixed across the board.

HIGHLIGHTS:

·         Developed U.S. and European stocks staged a massive rally during option expiration week as big momentum in the "safe haven" U.S. technology bellwethers, a better week for global Financials, short covering and a rise in the EUR/USD on concerted funding action outweigh underlying uncertainties over European debt and big weakness in China and emerging markets.

·         With key Asian markets closed for the beginning of the trading week, global equity index spreads moved massively in favor of U.S. markets: For example, the S&P 500 (SPX) gained +763 bps. vs. Hong Kong's HSI Index (HSI) and +428 bps. vs. the MSCI World xUS (MXWDU). Within Europe, Germany's DAX (NASDAQ:DAX) recouped 482 bps. vs. Europe's Stoxx Index (SX5P).

·         Much ado about nothing - stay long U.S. equities: With the Nasdaq-100 Index (NDX: +6.58% to +3.99% YTD) again trading within reach of new multi-year highs, big falls in high-profile streaming video provider Netflix (NFLX:        -23.92%) on weak subscriber numbers, Blackberry maker Research in Motion (RIM: -19.37%) on weak earnings or Swiss bank UBS (UBS: +0.84%) on a USD 2.3bn unhedged S&P/DAX/EuroStoxx futures loss did nothing to derail positive sentiment for non-Financial U.S. large caps.

·         With much trading in the benchmark indexes seemingly driven by expiration, the IPOX Indexes traded mixed vs. the benchmarks. In the United States, the IPOX U.S. 30 (IPXT: +5.16% to +0.75% YTD) moved again into positive territory YTD. IPOX heavyweight and 02/09 IPO vitamin/nutrition producer  Mead Johnson (MJN: +8.48%) rose to a post-IPO high on takeover rumors related to Swiss-based and CHF rich Nestle (NESN VX).

Key IPOX Indexes Returns YTD:


Ticker (BBG/Reuters)

Return

Last Week (%)

Return

YTD (%)

Exposure

IPGLC (NYSEARCA:USD)

+0.84

-10.84

Global

IPGL100 (USD)

+2.24

-5.47

Global

IPGL50 (USD)

+1.44

-4.76

Global

IPGL30 (USD)

+2.74

-5.11

Global

IPXO (USD)

+5.35

-0.40

U.S.A.

IPXT (USD)

+5.16

0.75

U.S.A.

IXTE (EUR)

+2.79

-15.06

Europe

IPTA (USD)

-2.26

1.31

Asia-Pacific

IPXUEM (USD)

-1.64

-16.91

Emerging

IPXUBRIC  (USD)

-0.51

-24.70

BRIC

IPXUCHCP  (USD)

-3.68

-18.86

China

CNI (USD)

-4.19

-19.93

China

IPXUCAUP  (USD)

-0.58

-13.79

China A

IPXULATT  (USD)

-1.66

-15.11

Latin America



·     
The IPOX Europe 30 (IXTE: +2.79% to -15.06% YTD) remained ahead of the Stoxx 50 Index (SX5P), benefiting from another big week in leading global miner and 05/2011 IPO Glencore International (GLEN LN: +9.83%).

·      The IPOX Asia-Pacific 30 (IPTA: -2.26% to +1.31%) fell for a second straight week on liquidation linked selling in insurer AIA Group (1299 HK: -4.99%), casino operator Sands China (-7.55%) and networker Gree Inc. (3632 JP: -9.70%). New IPOX Asia-Pacific 30 (IPTA) members Japan-domiciled snackfood producer Calbee Inc. (2229 JT: +1.58%) and cosmetics producer Pola Orbis (4927 JT: +6.30%) closed the week at a post-IPO high.

·      IPOX Emerging Markets closed the week sharply lower with the IPOX China 20 (CNI: -4.19% to -19.93%), IPOX Latin America 20 (IPXULATT: -1.66 to -15.11%) and IPOX China 30 A (IPXUCAUP: -0.58 to -13.79%) not benefiting from the big week in U.S. Equities.


Most significant IPOs launched (Week 09/12):   


Company

Ticker

Return / IPO (%)

Parade Technologies Ltd

4966 TT

103.85%

Jiangsu Tongguang Electronic 

300265 CH

27.12%

Shanghai Safbon Water Service 

300262 CH 

66.06%

SRS Ltd

SRSLT IN 

-42.67%

EP-Mint Co Ltd

6052 JP 

10.67%


·      Mainland China IPO activity remained the driver of global IPO deal flow: 8 notable deals launched last week with the average (median) IPO gaining +23.51% (+12.18%).



H.K. IPO kicks off cycle for "accessible" IPO deals:



Company

Code

Country

Lead Manager

PNE Solution Co  

131390 KS  

Korea

Kyobo Sec.

Henan Mingtai

601677 CH  

China A

PingAn  Sec.

Guangdong Chant  

002616 CH  

China A

Industrial Sec.

Roshow Tech.

002617 CH  

China A

Dongxing  

Shenzhen Danb.

002618 CH  

China A

Guosen Sec.

Henan Mingtai Al  

601677 CH  

China A

PingAn  

Hongguo Intern.

1028 HK  

H.K.

CITI, DBS


Formerly Singapore-traded, Retail/Apparel/Shoemaker Hongguo International (1028 HK) is kicking off a new IPO cycle for "accessible" IPO deals with a USD 150m-200m "re-IPO", expecting a market cap between USD 600m-USD 800m. Ahead of the larger H-share offerings of Citic Sec. (630 HK) and Sany Heavy at the beginning of October, this is the first in a series of upcoming H.K. IPOs linked to the potent H.K. consumer. Given the H.K. market conditions, we expect this company to price attractively, offering a diversification opportunity away from 2007 IPO and "seasoned" Belle Int'l (1880 HK).