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The IPOX Week (11/04/11): Groupon beats the CME, How value-conscious investors play social networking !!!

SUMMARY:

Global equities consolidated last week on Greeks political Zick-Zack and the MF Global bankruptcy. With domestic China catching a bid, the IPOX Strategies mostly outperformed. Key IPOs debuted successfully, underlining the positive global IPO sentiment. Gree's the best play. Small-cap IPOs lined up.

HIGHLIGHTS:

·         Greek's political Zick-Zackand the MF Global bankruptcy motivated a broad-based consolidation in equities. Stronger domestic China and moderately positive U.S. employment numbers supported.
·         The IPOX Global Strategy portfoliosoutperformed for a second week, generally beating the benchmarks. E.g., the broader IPOX Global 50 (IPGL50) shed -2.62% to -5.18% YTD, beating the MSCI World (MXWD) by a large 129 bps. Korea Life (088350 KS: +14.87%) surged on back-back.  
·         Performance was solid within the IPOX Regional Strategies Portfolios. In the United States, the broad IPOX U.S. 100 (IPXO) shed -2.39% to +2.36% YTD, broadly in line with the S&P 500 (SPX) with big weakness in IPOX heavyweight General Motors (GM: -10.74%) on auto sales contributing to the big pull-back after the recent run-up. IPOX member and 2011 IPO Dunkin' Brands (DNKN: -6.71%) announced better-than-expected earnings alongside a secondary offering and fell on profit taking. With Germany's DAX Index (DAX: -5.99%) suffering big losses, the IPOX Europe Strategy Portfolio declined in line with the benchmark with Germany's Wacker Chemie AG (WCH GY: -10.12%) falling anew on declining prices of polysilicon. Upside focus on the week remained on the IPOX Asia-Pacific Universewith the IPOX Asia-Pacific 30 Strategy Portfolio (IPTA: -1.18% to +1.57% YTD) beating benchmark MSCI Asia-Pacific (MXPC) by a massive +398 bps. With the Macau-casino complex (Wynn Resorts, Sands China and SJM Holdings) trading supported, select Australian-traded exposure rose, including AUD 2.5bn Treasury Wine Estates (TWE: +1.55%). IPOX's long-run pick Japans Social Network Service Gree Inc. (3632 JP: +11.88% to +169.02% YTD)  rose t o a  post-IPO  high  on speculation of an overseas (US) listing, new product initiatives and Groupon's initial IPO valuation. At a P/E multiple of 34.77 and the potential for a China-linked growth spurt, IPOX member Gree Inc. (3632 JP) is far the best accessible and liquid global social networking/gaming stock.

Key IPOX Strategy Returns YTD:
Ticker (BBG/Reuters)
Return
Week
Return
YTD
Name
IPGLC (NYSEARCA:USD)
-2.77%
-11.29%
IPOX Global Comp
IPGL100 (USD)
-3.17%
-5.65%
IPOX Global 100
IPGL50 (USD)
-2.62%
-5.18%
IPOX Global 50
IPGL30 (USD)
-3.73%
-4.57%
IPOX Global 30
IPXO (USD)
-2.39%
+2.36%
IPOX U.S. 100
IPXT (USD)
-2.97%
+2.45%
IPOX U.S. 30
IXTE (EUR)
-3.31%
-15.43%
IPOX Europe 30
IPTA (USD)
-1.18%
+1.57%
IPOX Asia-Pac. 30
IPXUEM (USD)
-2.64%
-18.47%
IPOX Emerging Mkts.
IPXUBRIC (USD)
-4.01%
-24.03%
IPOX BRIC 25
IPXUCHCP (USD)
-1.15%
-18.04%
China IPOX Comp.
CNI (USD)
-2.79%
-18.95%
China IPOX 20
IPXUCAUP (USD)
+2.60%
-11.85%
China IPOX Comp.
IPXULATT (USD)
-4.38%
-16.69%
IPOX LatAm 20
IPXK30K (KRW)
+3.06%
+5.07%
IPOX Korea 30

Most significant IPOs launched (Week 10/31/2011):  

Company
Ticker
Return / IPO
Groupon Inc                                                                    
GRPN US
+30.55%
Parkson Retail Asia Ltd
PRA SP
+34.04%
·    
A total of 14 global IPOs commenced trading last week with the average (median) equally-weighted IPO gaining a strong +37.77% (32.30%). All significant accessible deals recorded strong gains. At its first trade, Groupon's (NASDAQ:GRPN) market-cap exceeded exchange operator CME Group (NASDAQ:CME), a 2002 IPO. Confidence is supported by the powerful return in 10/06 Hong Kong IPO USD 22bn Financial CITIC Securities (6030 HK) which extended its post-IPO gain to +23.76%.

IPOs on the mainland China market remained well received: 6 companies commencing trading with the average (median) IPO gaining a strong 49.63% (44.07%).

Week ahead – small/micro-caps lined up:
Company
Code
Country
Lead Manager
Atlas Res.
0231453Z IJ 
Indonesia
INDO, UBS
Avigilon Corp
AVO CN
Canada
Rmd. James
Imperva Inc
IMPV US
U.S.A.
DB, JPM
NewLink Gen.
NLNK US 
U.S.A.
CGC, SNW
Lifetech Scientific
8122 HK 
Hong Kong
PIPER

Global micro/Small Caps are lined up for debut. We believe that Groupon (GRPN) paves the way for a successful debut of U.S. application Software maker Imperva (IMPV US) and biopharmaceutical company/cancer drug maker NewLink Genetics (NLNK US). China-based medical products maker Lifetech Scientific (8122 HK) is the only company set to debut in the Hong Kong market.