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The IPOX Week (10/24/2011): Groupons historic low !!!

SUMMARY:

Global investors continued to flock to U.S. large caps at the expense of emerging markets during option expiration week on good earnings, another string of positive U.S. macro numbers and declining risk, hence a weaker U.S. dollar. Amid lackluster global IPO activity, IPOX U.S. continued to record big gains. Historic Low for Groupon.

HIGHLIGHTS:

·         Global equities diverged sharply during U.S. option expiration week. In what appears safe haven, seasonally motivated asset allocation buying of U.S. large-cap and developed markets exposure with markets seemingly more insulated from European news flow, China-linked exposure underperformed by a big margin for another week. The IPOX portfolios traded mixed with IPOX Global Long/Short benefiting from another tumultuous week for China-linked consumer stocks as economic concerns weight on mainland and Hong Kong markets.

·         Much Ado about nothing – U.S. equities remain the place to be: The IPOX U.S. performed well with the IPOX U.S. 30 (IPXT) now trading well in positive territory YTD, gaining +0.94% to +2.51% YTD. The portfolio once again underlined its potential as it outperformed the Russell 2000 (RUT) and NASDAQ 100 (NDX) by between 94 bps and 246 bps. With heavyweight General Motors (GM: +0.94%) gaining for another week, top weight and dividend-heavy Kinder Morgan (KMI: +8.66%) rose after announcing a USD 21bn merger with El Paso Inc. (EP: +27.57%). Consumer staple Philip Morris (PM: +3.86%) helped to lift IPOX on better than expected earnings.
·         The IPOX Europe Portfolios lost some ground on continued relative weakness in key component global miner Glencore International (GLEN LN: -4.50%).

·         The IPOX Asia-Pacific 30 (IPTA: -3.71%) fell more than benchmarks HSI and (HSI: -2.57%) and the MSCI Asia Pacific Index (MXPC: -1.04%), reversing last weeks strong gains as the Macau-domiciled exposure suffered on news related to the cap in table numbers through 2013. Wynn Macau (1128 HK: -7.55%), Sands China (1928 HK: -3.23%) and SJM (880 HK: -13.82%) fell sharply.  

Key IPOX Strategy Returns YTD:
Ticker (BBG/Reuters)
Return
Week
Return
YTD
Name
IPGLC (NYSEARCA:USD)
-0.96%
-15.72%
IPOX Global Comp
IPGL100 (USD)
-0.46%
-9.25%
IPOX Global 100
IPGL50 (USD)
-0.89%
-9.85%
IPOX Global 50
IPGL30 (USD)
-0.20%
-7.79%
IPOX Global 30
IPXULSU (USD)
1.95%
-6.17%
IPOX Global L/S
IPXO (USD)
0.90%
0.64%
IPOX U.S. 100
IPXT (USD)
0.94%
2.51%
IPOX U.S. 30
IXTE (EUR)
-0.90%
-15.91%
IPOX Europe 30
IPTA (USD)
-3.71%
-9.02%
IPOX Asia-Pac. 30
IPXUEM (USD)
-1.58%
-24.45%
IPOX Emerging Mkts.
IPXUBRIC (USD)
0.19%
-29.81%
IPOX BRIC 25
IPXUCHCP (USD)
-4.14%
-30.36%
China IPOX Comp.
CNI (USD)
-3.05%
-30.38%
China IPOX 20
IPXUCAUP (USD)
-5.49%
-21.21%
China IPOX Comp.
IPXULATT (USD)
-0.75%
-20.69%
IPOX LatAm 20
IPXK30K (KRW)
-1.24%
-0.91%
IPOX Korea 30

·      Amid big spread moves through the IPO life-cycle with “young” IPOs (e.g. Kinder Morgan) outperforming more seasoned IPOs (e.g. Wynn Macau, Sands China), the IPOX Global Long/Short strategy rose +1.95% while continuing to display negative correlation.
·      IPOX Emerging Markets (IPOX China, IPOX BRIC; IPOX Korea, IPOX Latin America)closed well supported versus the benchmarks with the IPOX China 20 (NYSE:CNI) and IPOX Latin America (IPXULATT) recording significant performance gains of between 75 bps. and 109 bps.
·      The mixed performance amongst the IPOX Regional Portfolios left the IPOX Global Portfolio slightly lower when compared to the global benchmarks: The IPOX Global 30,e.g,  (IPGL30: -0.20%) retreated slightly.

Most significant IPOs launched (Week 10/17/2011):   
Company
Ticker
Return / IPO
Zeltiq Aesthetics Inc
ZLTQ US
20.15%
·      Just one significant deal launched last week with U.S. domiciled Zeltiq Aesthetics (ZLTQ US: +20.15%) in focus. The company specializing in non-invasive treatments to reduce body fat cut the initial IPO range and closed with a substantial gain (20.15%) from its final offering price.

·      Week ahead – Asian micro-caps lined up:
Company
Code
Country
Lead Manager
3-D Matrix Ltd
7777 JP
Japan
SMBC Nikko
Korea Materials
043290 KS
Korea
Hyundai Sec.
Poletowin Pit
3657 JP
Japan
Daiwa
Technovator Int  
1206 HK  
Hong Kong
PIPER
Fornton Group  
1152 HK  
Hong Kong
KINGST
Kikuchi Seis.                                                            
3444 JP  
Japan
Nomura  
eBook Initiative                                                     
3658 JP Equity
Japan
Daiwa  
·      With the exception of a slew of micro-caps hitting Asia, no deal flow is expected for The Americas and Europe.
Historic Low for Groupon: We follow the filing of Groupon Inc. (NASDAQ:GRPN) to offer less than 5% of their equity in an IPO, a ratio amongst the lowest in U.S. IPO history. We expect pre-IPO investors to support the IPO by “averaging in” their exposure and expect this to be the new paradigm for (tech) IPOs leading up to the Facebook IPO with most upside going to pre-IPO investors.