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The IPOX Week (07/16/2012): Amid Global Pick-up In ECM Deal Flow, U.S. In Focus !!!


Key equity indexes rose as weakness in China-linked markets and a higher dollar failed to materialize in downside volatility in European and U.S. equities and was subsequently met by big short covering towards week-end. Indonesia beats H.K. in last week's SE Asian IPO race. Big brand U.S. deals in focus.


· Key IPOX Indexes mixed, trail benchmarks: With key DM benchmarks such as the S&P 500 (SPX: +0.16%) or DAX (DAX: +2.29%) substantially beating Asian and China-linked exposure, the IPOX Global 50 (IPGL50) fell -1.42% to +7.88% YTD, underperforming benchmark MSCI World (MXWD) by 88 bps on bigger relative China-linked exposure. Weakness was spread amongst the IPOX Regional universe: In the United States (IPXO, IPXT), the IPOX U.S. 30 (IPXT) fell -0.19% to +13.51% YTD substantially beating the broader IPOX U.S. 100 (IPXO) on relative declines in the Russell 2000 (RUT: -0.76%). We note the big jump in electric car maker and IPOX U.S. 30 holding takeover candidate Tesla Inc. (TSLA: +10.52%) amid strong hopes for its Model S and as a 13th mall store opened. Recent IPOs traded most heavily on the notorious pre-IPO exchanges suffered more declines with Facebook (FB: -3.18%), Zynga (ZNGA: -8.58%) or Groupon Inc. (GRPN: -7.70%) slumping news amid relative NASDAQ (NDX: -1.05%) weakness. Key IPOX holding Phillips 66 (PSX: +4.70%), added in April 2012, became another top IPOX stock held by Berkshire Hathaway (BRK/A US). In Europe, big declines in Spanish Financial Bankia (BKIA SM: -23.32%) was mitigated by strength amongst some of the key German IPOs Brenntag (BNR GY: +4.41%) and Kabel Deutschland (KD8 GY: +5.89%). Global miner Glencore International (GLEN LN: +2.03%) continued to recover on Qatar/XStrata (XTA LN: +1.53%) optimism. Developed Asia-Pacific (IPTA) remained jittery on selling in high-end luxury stocks including fashion maker Prada (1913 HK: -4.52%) and key IPOX holding Japanese Financial Dai-Ichi Life (8750 JP: -9.33%). The IPOX Asia-Pacific 30 (IPTA) lost -3.02% to +11.25% YTD, 52 bps. more than benchmark MSCI Asia-Pacific (MXPC). Amid strong H.K. IPO deal flow - in China-linked markets (NYSE:CNI) - the IPOX China 20 maintained its YTD relative gain vs. benchmark Hang Seng Enterprise Index (HSCEI), dropping -4.60% to -1.05% YTD.

· IPOX Long-only Strategy Returns YTD 12:

Ticker (BBG/Reuters) Week Q2 12 YTD 12
IPOX Global 50 (IPGL50) (NYSEARCA:USD) -1.42% -8.13% +7.88%
MSCI World (MXWD) -0.54% -6.36% +3.30%
IPOX U.S. 100 (IPXO -0.70% -5.23% +12.94%
IPOX U.S. 30 (IPXT) -0.19% -3.67% +13.51%
S&P 500 (SPX) +0.16% -3.29% +7.89%
IPOX Europe50 (IPXUJPEU) (EUR) +0.64% -10.75% -4.22%
IPOX Europe30 (IXTE) (EUR) +0.91% -12.33% -8.07%
STOXX 50 (SX5P) (EUR) +0.68% -3.16% +2.97%
IPOX Asia-Pacific 30 (IPTA) -3.02% -5.69% +11.25%
MSCI Asia-Pacific (MXPC) -2.54% -6.89% +1.08%
IPOX China 20 -4.60% -8.97% -1.05%
Hang Seng Enprs. (HSCEI) -4.57% -10.01% -7.04%

Why choose IPOX to close the IPO/spin-off asset allocation gap?
§ Proven: Real-time performance over market cycles

§ Scalable and Stable: Clearly defined Philosophy

§ Patented: Index Technology

§ Best in Practice: Support and Research

· The Week ahead - Big Brand U.S. deals :

Company Code Country Lead
Durata Therapeutics Inc DRTX US U.S.A. CS
Fender Musical Instr. FNDR US U.S.A. William Blair
Five Below Inc FIVE US U.S.A. BARC, JEFF
Kayak Software Corp KYAK US U.S.A. DB
Mastercraft International 8146 HK H.K. LUEN, WRLDSC
Palo Alto Networks Inc PANW US E U.S.A. CITI, GS

Global IPO focus shifts from SE Asia to the U.S. this week as a number of key deals are lined up: William Blair-led leading guitar maker Fender Musical Instr. (FNDR US) seeks to raise USD 160m for a large 40.64% of the firm. Its distribution reliance on Guitar Centers, with its debt rating outlook recently cut to "negative" by S&P, is a concern. Specialty retailer Five Below Inc. (FIVE US) focuses on retailing merchandise for teen- and pre-teen customers. At the mid-point of the range, it seeks to raise USD 134m for an 17.82% stake in the company. Highly anticipated Kayak Software (KYAK US) is an operator of a travel website and should benefit from the strong performance of its stock market traded incumbents such as IPOX member Trip Advisors (TRIP US). Underwriters DB and MS structured the deal to rise sharply, initially. Small-float internet security company Palo Alto Networks (PANW US) should also benefit from the current indiscriminate initial demand for mid-cap specialty technology IPOs. Home furniture maker micro-cap Mastercraft (8146 HK) is the only H.K. deal lined up.

Most significant IPOs traded (Week 07/09/12):

Company Ticker Return / IPO (%)
Bank Pembangunan Daerah Jawa BJTM IJ 3.49%
Bolina Holding Co Ltd 1190 HK 7.91%
China Putian Food Holdings Ltd 1699 HK 22.86%
China Yongda Automobiles Services 3669 HK 0.00%
Gading Development Tbk PT GAMA IJ 51.43%
Global Teleshop Tbk PT GLOB IJ 8.70%
HomeTrust Bancshares Inc HTBI US 20.00%
Inner Mongolia Yitai Coal Co 3948 HK -0.12%
MNC Sky Vision Tbk PT MSKY IJ 1.97%
Qualipak International Holdings Ltd 1332 HK -22.64%
Sheen Tai Holdings Grp Co Ltd 1335 HK 13.33%
Silverman Holdings Ltd 1616 HK -0.91%
Tri Banyan Tirta Tbk PT ALTO IJ 78.57%
Wanguo International Mining Group 3939 HK 2.51%

24 companies commenced trading last week, underlining the big-turnaround in the global IPO market since Facebook (NASDAQ:FB). The average (median) IPO rose a strong +25.61% (+10.35%). Initial IPO sentiment diverged sharply: While the average (median) H.K. deal rose +2.87% (+1.86%), the Indonesian counterpart soared +28.83% (+8.70%).

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