The IPOX® Week, November 21, 2016

  • Ahead of U.S. holiday week, IPOX U.S. Indexes gain during expiration as Dollar surges, global rates rise.
  • Other IPOX Regional Indexes trade mixed.
  • IPO focus on markets outside the U.S.

Ahead of U.S. holiday week, IPOX U.S. Indexes gain during expiration as Dollar surges, global rates rise. London-listed ETF linked to the IPOX 100 U.S. Index (IPXO) gains traction with European investors. The IPOX U.S. Indexes gained last week, with the diversified broad IPOX 100 U.S. Index (IPXO) adding +0.73% to +4.34% YTD, lagging the S&P 500 (SPX), main gauge for U.S. stocks, as the dollar remained buoyed and interest rates continued to rise. Big gains in small-caps outweighed the weak performance of U.S.-traded big pharma: While optical products maker Lumentum (LITE US: 15.30%), IPO Spin-off specialty chemicals maker Valvoline (VVV US: 13.70%) or refiner Murphy USA (MUSA US: 11.34%) surged, IL-based drug makers IPOX heavyweights Abbvie (ABBV US: -4.09%) and Baxalta/Shire (SHPG US: -5.86%) fell as U.S. health care and biotech weakened following the big Trump-victory-infused rally the week before. Notable was the slump in fitness/health club chain 08/2015 IPO Planet Fitness (PLNT US: -18.46%) after announcing a secondary offering. Reflective of the strength in the broad 800-member-strong IPOX U.S. Composite Index (IPXC), 71% of the holdings in the IPOX 100 U.S. Index (IPXO) rose on the week, with the average (median) equally-weighted stock adding 1.81% (1.89%), sharply outperforming the applied market-cap weighted index for a second week in a row. We note strong trading activity in Exchange-traded products tracking the IPOX 100 U.S. Index (IPXO), including the 5-star USD million 600 NYSE-listed First Trust U.S. IPO Index ETF (FPX US) and its London Stock Exchange-traded counterpart, the First Trust US IPO Index UCITS ETF (FPX LN) available to European investors.

IPOX Returns (%) (P) Week Q3 16 YTD 16
Exposure: Global/International (xUS) (USD)
IPOX Global 50 (IPGL50) -0.21 8.91 -2.79
IPOX Global 30 (IPGL30) -0.44 9.85 0.78
IPOX Intern. (IPXI)* -0.44 11.01 -4.63
Exposure: United States
IPOX Composite U.S. (IPXC)* 1.28 11.33 7.42
IPOX 100 U.S. (IPXO)* 0.73 7.16 4.34
IPOX 30 U.S. (IPXT) 0.48 8.41 6.91
Exposure: Europe/Nordic Region
IPOX Europe (IXTE) 0.02 12.02 -5.63
IPOX Nordic (IPND) 2.62 7.45 -4.72
Exposure: Asia-Pacific/China Region
IPOX Asia-Pacific (IPTA) -1.40 5.28 -1.21
IPOX China C. (IPXUCHCHP)* 0.89 16.94 0.01
IPOX China (CNI) 1.22 11.59 -6.40

* 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]).

Other IPOX Regional Indexes trade mixed. Amid post-U.S. election position refining, other IPOX Regional Indexes traded mixed vs. the market benchmarks last week with most notable absolute upside recorded by the IPOX Nordic Index (IPND), with strong gains in Copenhagen-traded IPOX heavyweight specialty chemicals maker ISS A/S (ISS DC: 2.08%) and 06/2016 IPO alternative energy firm Dong Energy (DENERG DC: 2.00%) driving index performance. Amid continued Euro weakness having insignificant impact on Continental European equities, 10/2015 Bayer (BAYN GY) Spin-off IPO specialty chemicals maker Covestro (1COV GY: 4.37%) closed at a weekly all-time high ahead of a downgrade by investment bank Goldman Sachs (GS US) over the week-end. The Dutch government used a window of opportunity opened by the big rally in global Financials to substantially decrease its stake in 11/2015 privatization IPOX heavyweight Financial ABN Amro (ABN NA: -5.12%), which remained 20.01% higher based on its IPO price. Amid gains in inflation expectations, the slew of last years privatization IPOs in Japan recorded a solid week, namely Japan Post Bank (7182 JP: 7.07%), Japan Post Holdings (6178 JP: 3.89%) and Japan Post Insurance (7181 JP: 3.27%).

Traded IPOs (wk.: 11/14) Identifier Return (%)
Autosports Group Ltd ASG AU 4.17
Bravura Solutions Ltd BVS AU -13.10
Datang Environment Industry 1272 HK 0.00
Dis-Chem Pharmacies Pty Ltd DCP SJ 16.11
Doosan Bobcat Inc 241560 KS 19.67
Upcoming IPOs (wk.: 11/21) Identifier Sector
Alligator Bioscience AB ATORX SS Health Care
Guangdong Adway 6189 HK Financials
Innovative Industrial Properties IIPR US Real Estate
Mengke Holdings Ltd 1629 HK Consumer S.
RussNeft PJSC RNFT RM Energy
Serneke Group AB SERN SS Real Estate
THQ Nordic AB THQNB SS Info Tech

IPO focus on markets outside the U.S. At least 5 significant firms commenced trading on an accessible (non China A shares and domestic India) stock exchange last week, with the average (median) equally-weighted deal gaining 5.37% (5.17%) based on the difference between the final offerings price and Friday’s close. Focus during the upcoming week remains in deal flow outside the U.S., including the Nordic region (ATOR SS, SERN SS, THQNB SS) and Hong Kong.

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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