IPOX Indexes extend weakness into quarter-end, China-linked exposure slides anew. Continued selling in China-linked exposure on rising trade tensions and profit taking in select high-beta names continued to pressure the IPOX Indexes into quarter end. Weakness extended across regions. In the U.S., e.g., the FAANG-free, style agnostic IPOX 100 U.S. (IPXO) shed -1.96% to +4.87% YTD, lagging the S&P 500 (SPX) – benchmark for U.S. stocks – by -63 bps. on the week, however, remained +194 bps. ahead of the S&P 500 (SPX) during Q2. Here, losses were driven by big declines in small- and mid-cap high beta exposure with 77/100 portfolio holdings closing the week in negative territory. Most pressure amongst individual stocks was on HFT Virtu Financial (VIRT US: -10.91%), social networker Match Group (MTCH US: -9.30%) or e-commerce firm StichFix (SFIX US: -8.99%), while pending corporate actions linked to entertainment facilities operator Madison Square Garden (MSG US: +11.32%) or drug maker IPOX heavyweight Shire (SHPG US: +4.29%) helped to mitigate portfolio losses. In non-U.S. domiciled exposure, while China-linked stocks including e-commerce behemoth Alibaba (BABA US: -8.16%) continued to trade under pressure, we note significant upside in select Japan-traded IPOX portfolio holdings, including application software maker PKSHA Technology (3993 JP: +21.07%), industrial machinery maker Optorun (6235 JP: +6.23%) or logistics firm SG Holdings (9143 JP: +3.23%).
IPOX 100 U.S. ETF (FPX) posts strong quarterly gain. The USD billion 1.2 IPOX 100 U.S. (IPXO)-linked First Trust U.S. Equity Opportunities ETF (FPX) fell to +5.10% YTD last week, recording a quarterly gain of +4.46%, while its international version (FPXI) fell to -0.91% YTD (-5.68% last quarter). Amongst IPOX-linked actively managed funds, the Catalyst IPOX® Allocation Fund (OIPAX) fell to +8.68% YTD last week, with exposure to immediate U.S. IPO deal flow propelling the fund to a quarterly gain of a strong +7.44%.
IPOX® 100 U.S. – Investing with the “FPX” ETF since 2006
|IPOX Price Returns (%)||Last Week||2017||2018 YTD|
|Exposure: Global/International (xUS) (USD) (Price)|
|IPOX Global (IPGL50)||-2.57||28.59||-0.11|
|IPOX International (IPXI)*||-2.94||37.80||-1.83|
|Exposure: United States (USD) (Price)|
|IPOX Composite U.S. (IPXC)*||-2.99||33.64||5.89|
|IPOX 100 U.S. (IPXO)*||-1.96||26.04||4.87|
|IPOX 30 U.S. (IPXT)||-1.58||26.63||1.49|
|Exposure: Europe/Nordic Region (EUR) (Price)|
|IPOX Europe (IXTE)||-1.68||19.27||1.53|
|IPOX Nordic (IPND)||-1.61||17.91||-0.42|
|Exposure: Asia-Pacific/China Region (USD) (Price)|
|IPOX Asia-Pacific (IPTA)||-1.82||23.30||-0.88|
|IPOX China (CNI)||-5.72||37.67||6.34|
* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT and CME listed e-mini IPOX® 100 U.S. Index Futures [Symbol: IPOU8].
IPO Deal-flow Review & Outlook: U.S. shows strength as deals surge. Ahead of massive IPO, Chinese smartphone giant Xiaomi prices Hong Kong IPO at low end: A massive 27 (non-China A shares and non-local India) firms debuted last week across accessible regions, with the average (median) equally-weighted firm adding +9.53% (+0.67%) based on the difference between the final offering price and Friday’s close. While IPOs in foreign markets generally debuted lackluster, select deals in the U.S. soared anew, including U.S. biopharma Tricida (TCDA US: +57.37%) or retailer BJ’s (BJ US: +39.12%). Amid the shortened U.S. trading week, focus this week is on deals outside the U.S. (see next page). We also note the upcoming IPO of Chinese smartphone marker Xiaomi (1810 HK). Priced at the low end, the company’s market cap. was set at ca. ½ of its $100 billion valuation previously. Shares will commence trading on the Hong Kong Stock Exchange on, Monday July 9th.
|Select IPOs traded (week: 06/18/2018)||Country|
|Amigo Holdings PLC||Britain|
|BJ’s Wholesale Club Holdings I||United States|
|BrightView Holdings Inc||United States|
|DM Wenceslao and Associates In||Philippines|
|Domo Inc||United States|
|Forty Seven Inc||United States|
|IPL Plastics Inc||Canada|
|Jiangxi Bank Co Ltd||China|
|Neuronetics Inc||United States|
|Translate Bio Inc||United States|
|Tricida Inc||United States|
|Wise Talent Information Techno||China|
|Select IPOs expected (week: 07/02/2018)||Country|
|Pivotal Systems Corp||United States|
|Okeanis Eco Tankers Corp||Greece|
|Qeeka Home Cayman Inc||China|
|Steve Leung Design Group Ltd||Hong Kong|
|China Isotope & Radiation Corp||China|
Josef Schuster is the founder of IPOX Schuster LLC (www.ipoxschuster.com), a Chicago-based Financial Services company specialized in Financial Products Design related to Initial Public Offerings and corporate Spin-offs. He is the chief architect of the IPOX Indexes, a global index group initiated in 2004 that encompasses an index technology allowing for asset-allocation focused exposure to the “going public” effect associated with global IPOs and Spin-offs. Mr. Schuster earned his Bachelor of Arts degree in Business Administration in 1994 from the European Business School, London. Mr. Schuster was also awarded a MSc in Accounting and Finance in August 1996 and a MPhil / PhD in Accounting and Finance in June 2003 from the London School of Economics.
ABOUT THE IPOX INDEXES: Through the range of the IPOX Indexes, market participants have an innovative opportunity to navigate the global IPO and Spin-off market and to track the performance of this economically significant sector more accurately and comprehensively than with any other index group. The IPOX Indexes accomplish the systematic indexation of the aftermarket performance of the IPO and Spin-off sector, while – at the same time – preserving the benefits of diversification. Linked to the IPOX 100 U.S. Index, for example, IPOX-linked investment products available to investors include the pioneering USD million 600, 5-star First Trust U.S. IPO ETF (ticker: FPX). On February 18, 2016, CME Group, the world’s largest exchange operator, launched e-mini IPOX 100 U.S. Index Futures, offering market participants for the first time a tool to manage the aggregate risk associated with U.S. IPOs and Spin-offs.
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