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The IPOX Week (11/14/2011): Focus in on IPOs domiciled in the U.S. !!!

SUMMARY:

Weak Asia and negative Europe-related news flow through Thursday did little to dampen the powerful momentum in U.S. equities towards November option expiration. While IPOX traded mixed to lower, global IPO activity continued to build momentum. Focus in on IPOs domiciled in the U.S.   

HIGHLIGHTS:

·         For U.S. stocks, its much ado about nothing again: Negative Europe-related news flow through Thursday, the S&P snafu over France's downgrade contributing to big intra-day swings and weak Asia did little to derail the powerful momentum in U.S. large-caps towards option expiration. With Apple (AAPL: -3.90%) under pressure, good earnings from the U.S. multinationals and big intra-day swings, U.S. Index spreads continued to move in favor of the S&P 500 (SPX) and Dow Jones (INDU) vs. the Nasdaq-100 (NDX) und Russell 2000 (RUT). The expectations of a strong U.S. holiday shopping season kicking off in two weeks, Wednesday's launch of the Kindle Fire and a reduced fear over European debt should provide ample momentum to take benchmarks S&P 500 (SPX) and the Nasdaq-100 (NDX) towards and above the recent resistance levels during option expiration week.

·         The IPOX Global Strategy portfoliosunderperformed last week with the IPOX Global 30 (IPGL30) shedding 60 bps. to -5.14% YTD, lagging benchmark MSCI World (MXWD) by 53 bps. Declines amongst Hong Kong-traded IPOX heavyweights Wynn Macau (1128 HK: -12.34%) and Sands China (-11.42%) contributed to the relative decline. We note continued weakness in U.S. car manufacturer General Motors (GM: -4.66%) on earnings, European concerns and uncertainties related to batteries used in the Volt, its fully electric car. Global Payment Processors on fire: IPOX heavyweights global payment processors U.S.'s Visa (V: +2.72%) and Brazil's Cielo (CIEL3 BZ: +1.48%) and RedeCard (+1.88%) reached all-time post IPO-highs, underlining the sentiment towards specialty technology.  

·         Performance was mixed within the IPOX Regional Strategies Portfolios. In the United States, the IPOX U.S. 30 (IPXT) rose +0.29% to +2.74%, lagging benchmark S&P 500 by 56 bps. We note big declines in CA-based rare earth miner Molycorp (MCP: -16.75%) on weak earnings. In Europe, the IPOX Europe 30 (IXTE) fell -0.62%, lagging benchmark Stoxx Europe 50 (SX5P) by 105 bps. Lisbon-traded and IPOX heavyweight Galp Energy (GALP PL:         -11.37%) fell after an agreement to sell a stake in its Brazil unit to China's Sinopec Group at a value below expectations. Aforementioned weakness in the Macau casino complex led to a sharp decline in the IPOX Asia-Pacific 30 (IPTA), shedding -4.41% to -2.91% YTD. With entertainment software maker Nexon (3659 JP) lining up for a key IPO on the Tokyo Stock Exchange on December 14, 2011, social networker and IPOX pick Gree (3632 JP: -1.37%) hit new all-time highs during the trading week. In IPOX Emerging Markets, the IPOX Korea 30 (IPXK30K) continued to trade well, gaining 125 bps vs. benchmark Kospi 200 (KOSPI2) last week.

Key IPOX Strategy Returns YTD:
Ticker (BBG/Reuters)
Return
Week
Return
YTD
Name
IPGLC (NYSEARCA:USD)
-1.44%
-12.57%
IPOX Global Comp
IPGL100 (USD)
-1.11%
-6.69%
IPOX Global 100
IPGL50 (USD)
-1.68%
-6.78%
IPOX Global 50
IPGL30 (USD)
-0.60%
-5.14%
IPOX Global 30
IPXO (USD)
-0.49%
+2.33%
IPOX U.S. 100
IPXT (USD)
+0.29%
+2.74%
IPOX U.S. 30
IXTE (EUR)
-0.62%
-15.52%
IPOX Europe 30
IPTA (USD)
-4.41%
-2.91%
IPOX Asia-Pac. 30
IPXUEM (USD)
-1.15%
-20.25%
IPOX Emerging Mkts.
IPXUBRIC (USD)
-2.57%
-25.99%
IPOX BRIC 25
IPXUCHCP (USD)
-4.82%
-21.99%
China IPOX Comp.
CNI (USD)
-4.25%
-22.39%
China IPOX 20
IPXUCAUP (USD)
-2.53%
-14.77%
China IPOX Comp.
IPXULATT (USD)
-0.60%
-16.46%
IPOX LatAm 20
IPXK30K (KRW)
-2.46%
+2.49%
IPOX Korea 30

Most significant IPOs launched (Week 11/07/2011):   
Company
Ticker
Return / IPO
iTEST Co Ltd
089530 KS
5.42%
Lifetech Scientific Corp
8122 HK
0.00%
NewLink Genetics Corp
NLNK US
1.14%
Atlas Resources Tbk PT
ARII IJ
-2.00%
Avigilon Corp
AVO CN
0.44%
CQV Co Ltd
101240 KS
-9.57%
Imperva Inc
IMPV US
46.67%
Shin-heung Machine Co Ltd
007820 KS
87.06%
·      14 IPOs were launched last week with the average (median) accessible deal rising +14.65% (+0.79%). The strong debut of U.S. specialty tech Imperva (IMPV: +46.67%) will support all U.S. deals lined up this week.

Week ahead – U.S. domiciled deals in focus:
Company
Code
Country
Lead Manager
Bluestem Brands
BSTM US  
U.S.A.
PJC, WFS
Clovis Oncology  
CLVS US  
U.S.A.
CS, JPM
InvenSense Inc
INVN US  
U.S.A.
GS, MS
Angie's List Inc
ANGI US  
U.S.A.
BOFAML
Delphi Auto
DLPH US  
U.S.A.
GS, JPM
Digital Domain  
DDMG US  
U.S.A.
Roth Capital  
Intermolecular  
IMI US  
U.S.A.
BCLY, JPM
Mattress Firm  
MFRM US  
U.S.A.
BCLY,  UBS
Manning& Napier  
MN US  
U.S.A.
BOFAML
Renheng  
8012 HK  
Hong Kong
Shenyin  
Semisysco Co  
136510 KS  
Korea
HI Inv.
With the IPO window open, focus is on U.S. domiciled deals with most upside likely in specialty technology (INVN, ANGI, BSTM). We expect less enthusiastic demand for private equity backed Delphi Auto (NYSE:DLPH) or Mattress Firm (NASDAQ:MFRM), the third U.S. IPO in the sector.