The IPOX® Week, November 14, 2016

  • IPOX U.S. Indexes surge as U.S. elects new president. Assets linked to the IPOX U.S. Indexes gain.
  • Other IPOX Regional Indexes underperform.
  • Ahead of shortened U.S. trading week, little deal flow seen.

IPOX U.S. Indexes gain as U.S. elects new president. Assets linked to the IPOX U.S. Indexes gain. The IPOX U.S. Indexes reversed two weeks of losses to close the week with big gains, with the diversified broad IPOX 100 U.S. Index (IPXO) – underlying for the USD million 594 5-star First Trust U.S. IPO Index ETF (FPX) – rising by +4.09% to +3.61% YTD, ahead of the S&P 500, main gauge for U.S. stocks. Trading was tumultuous and volative, with certainty about the outcome of the election propelling health care and Financial exposure, while interest rate sensitive firms and consumer staples suffered losses. Individual companies with most upside focus included Consumer Financial Voya Financial (VOYA US: +22.04%), specialty chemicals play The Chemours Company (CC US: +21.11%) and IT Services provider CSRA (CSRA US: +18.04%), while small-caps recently recording solid earnings also gained strongly, including fitness club chain Planet Fitness (PLNT US: +16.91%) and social networker Match Group (MTCH US: +15.81%). The potenial of a repeal of Obamacare and positive IP news also helped hard-hit big pharma to strong gains, including IL-based Abbvie (ABBV US: +12.60%) and Shire (SHPG US: +13.38%). After earnings, select IPOX heavyweights lagged strongly, including consumer staples Kraft Heinz (KHC US: -3.38%) and Restaurant Brands (QSR US: -2.03%), as well as U.S. social networker Facebook (FB US: -1.43%). In all, 73.7% of the index holdings in the IPOX 100 U.S. (IPXO) Index rose on the week, with the average (median) equally-weighted stock gaining +4.53% (+4.39%) on the week, +44 bps. (+30 bps.) ahead of the index.

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) 1.82 8.91 -2.59
IPOX Global 30 (IPGL30) 1.60 9.85 -3.02
IPOX Intern. (IPXI)* -1.77 11.01 -4.22
Exposure: United States
IPOX Composite U.S. (IPXC)* 3.40 11.33 6.06
IPOX 100 U.S. (IPXO)* 4.09 7.16 3.61
IPOX 30 U.S. (IPXT) 4.85 8.41 6.40
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 0.47 12.02 -5.59
IPOX Nordic (IPND) -0.61 7.45 -7.14
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -1.13 5.28 0.19
IPOX China C. (IPXUCHCHP)* -1.97 16.94 -0.87
IPOX China (CNI) -0.44 11.59 -7.54

* Basis for Exchange-Traded Products (e.g. FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT) and CME Futures (e-mini IPOX 100 U.S. Index Futures [IPOZ6]).

IPOX Indexes outside the U.S. underperform. Amid big asset allocation-focused re-allocation into benchmark exposure after the U.S. election, other IPOX Regional Indexes signifiantly lagged the benchmarks last week, including the IPOX Europe (IXTE), IPOX Nordic (IPND), IPOX Asia-Pacific (IPTA) and IPOX China (CNI). Amid rising rates globally, earnings season and a curb on the Hong Kong property market, individual companies in focus included H.K. property developer Cheung Kong Property (1113 HK: -9.59%), Canadian utility Hydro One (H CT: -5.51%), Chinese online market place Alibaba (BABA US: -4.69%), German car maker Schaeffler (SHA GY: -7.32%) or Nordic property management firm ISS (ISS DC: -4.45%). IPOX Holdings recording substantial upside included the slew of global IPOs in the Financial industry, including Dutch-domiciled NN Group (NN NA: +11.37%) and ABN Amro (ABN NA: +6.89%), as well as beleaguered Japan Post (6178 JP: +5.95%) and Japan Post Bank (7182 JP: +5.36%). We note a fresh weekly post-IPO high in 10/2015 IPO Italian luxary car maker Ferrari (RACE IM: +7.99%) after strong quarterly results.

Priced IPOs (wk.: 11/05) Identifier Return (%)
Charter Hall Long Wale REIT CLW AU -4.00
China Art Financial Holdings Ltd 1572 HK 4.00
Clifford Modern Living Holdings 3686 HK 45.65
Elanor Retail Property Fund ERF AU 0.00
Gemilang International Ltd 6163 HK 7.03
Guangdong Kanghua Health 3689 HK -17.07
Inghams Group Ltd ING AU 2.86
Luk Hing Entertainment Group 8052 HK 1900.00
Sheung Yue Group Holdings Ltd 1633 HK 58.75
WW Holding Inc 8442 TT -1.00
Zhou Hei Ya International 1458 HK 13.44
Upcoming IPOs (wk.: 13/05) Identifier Sector
Datang Environment Industry 1272 HK Industrials

Ahead of shortened U.S. trading week, little deal flow seen. At least 11 firms commenced trading on an accessible (non China A shares and domestic India) stock exchange last week, with the median equally-weighted deal gaining +4.00% based on the difference between the final offerings price and Friday’s close. With U.S. politics occupying the deal calendere, focus was on deals in the Asia-Pacific region which will also dominate the deal calendar during the upcoming week.

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.

Disclosure: the author has no position in the stocks mentioned.

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