The IPOX® Week, November 26, 2018

  • IPOX Indexes record steep declines across the board, Apple (AAPL US: -10.98%) Chinese counterpart handset maker Xiaomi (1810 HK: 11.61%) rises sharply.
  • IPO Deal-flow Review & Outlook: U.S. IPO market set to remain quiet. Focus on Hong Kong IPOs as Alibaba-backed online parenting platform operator Babytree (1761 HK) and Tencent-backed online travel agent Tongcheng-eLong (780 HK) set to debut amid steep price cuts.

IPOX Indexes record steep declines across the board, Apple (AAPL US: -10.98%) Chinese counterpart handset maker Xiaomi (1810 HK: 11.61%) rises sharply. The IPOX Indexes followed the big losses in global equity markets during the shortened U.S. trading week, as mixed earnings and continued indiscriminate (technical) liquidation selling in high-beta momentum exposure amid relatively stable U.S. rates continued to weigh. The IPOX 100 U.S. (IPXO), e.g., shed -4.04% to -5.16% YTD with just 10/100 portfolio holdings closing the week in positive territory, while surrendering the key 3000 level. Declines extended across regions and sectors with the IPOX Indexes focusing on Developed Asia-Pacific (IPTA) and China (CNI) outperforming their peers in other global regions anew, as select Japan- and China linked exposure recorded notable gains. Focus in individual IPOX portfolio holdings on the week was on German chemicals maker Covestro (1COV GY: -15.72%), while the slew of payment processors including Adyen (ADYEN NA: -14.00%), Square (SQ US: -10.01%) or PayPal (PYPL US: -8.35%) declined for a 2nd week. Notable were the strong relative gains in select and previously underperforming Asia-linked exposure: While U.S.’s Apple (AAPL US: -10.98%), e.g., fell, its China-linked counterpart 07/18 H.K. IPO Xiaomi (1810 HK: 11.61%) surged on big volume and good earnings. Moreover, we note post IPO-highs in select Tokyo-traded IPOX exposure including pharma products maker SanBio (4592 JP: 10.20%) or Restaurant operator Skylark (3197 JP: 2.99%).

IPOX® 100 U.S. Investing with the ‘FPX’ ETF since 2006

Select IPOX-linked investment products performance update: Last week, the IPOX 100 U.S. (IPXO)-linked First Trust U.S. Equity Opportunities ETF (FPX) fell to -4.72% YTD, while the IPOX International (IPXI)-linked “FPXI” ETF fell to -11.63% YTD. Amongst the range of actively managed IPOX-linked products, the broader focused Catalyst IPOX® Allocation Fund (OIPAX) declined to -0.22% YTD.

Select IPOX® Indexes Returns (%) Last Week 2017 2018 YTD
IPOX® Long-Only: Global/International
IPOX® Global (IPGL50) (USD) -3.14 28.59 -9.09
IPOX® International (IPXI)* (USD) -2.23 37.80 -11.70
IPOX® Long-Only: United States
IPOX® Composite U.S. (IPXC)* -3.28 33.64 -3.47
IPOX® 100 U.S. (IPXO)* -4.04 26.04 -5.16
IPOX® 30 U.S. (IPXT) -3.75 26.63 -6.53
IPOX® Long-Only: Europe/Nordic
IPOX® 30 Europe (IXTE) (EUR) -3.34 19.27 -9.85
IPOX® Nordic (IPND) (EUR) -3.30 17.91 -12.77
IPOX® 100 Europe (IPOE)* (USD) -2.52 41.77 -13.98
IPOX® Long-Only: Asia-Pacific/China
IPOX® Asia-Pacific (IPTA) (USD) -0.66 23.30 -3.42
IPOX® China (CNI) (USD) -1.11 37.67 -16.72
IPOX® Japan (IPJP) (JPY) -0.38 N/A N/A
IPOX® Market Neutral
Beta Neutral Strategy: Yes No
IPOX® Market Neutral Asia-Pacific** X 7.28
IPOX® Market Neutral Europe** X 17.75
IPOX® Market Neutral U.S.** X 9.59
IPOX® Market Neutral Global** X 9.73

* Basis for ETPs: FPX US, FPX LN, FPXU FP, FPXI US, TCIP110 IT and CME-traded e-mini IPOX® 100 U.S. Futures [Symbol: IPOZ8]. ** Live since 03/18.

IPO Deal-flow Review & Outlook: U.S. IPO market set to remain quiet. Focus on Hong Kong IPOs as Alibaba-backed online parenting platform operator Babytree (1761 HK) and Tencent-backed online travel agent Tongcheng-eLong (780 HK) set to debut amid steep price cuts. Only 4 firms – all micro-caps – debuted last week with the average (median) equally-weighted company declining by -1.16% (-1.15%) based on the difference between the final offering price and Friday’s close. What constituted the first IPO on the Belgrade Stock exchange in 80 years, Serbian’s wind energy producer Fintel Energija (FINT SG: +1.80%) finished the week above debut. With no firms scheduled to commence trading in the U.S. this week, Hong Kong readies two more unicorns to add to its long list of 2018 IPOs, despite the weak market sentiment. Downsized and priced at the bottom of the range, deals include Alibaba (BABA US: -2.45%) -backed online parenting platform operator ca. USD billion 1.5 Babytree (1761 HK) and Tencent (700 HK: 0.34%) -backed online travel agent Tongcheng-eLong (780 HK), valued at ca. $2.5 billion. Both firms were originally looking to raise $800 million to $1 billion, respectively, but were forced to scale back pricing and offering size due to the recently sharply deteriorating global equity capital market conditions.

Select IPOs traded (week: 11/19/2018) Domicile
Asiana IDT Inc South Korea
Fintel Energija AD Serbia
PharmAbcine South Korea
Watts International Maritime Engineering China
Select IPOs expected (week: 11/26/2018) Domicile
Babytree Group China
Tongcheng-eLong Holding Ltd China

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