Deutsche Börse publishes IPO indicator for Q3 2011

Mood deteriorated on primary market

Deutsche Börse published the IPO sentiment indicator forecasting issue activity for the 3rd quarter of 2011 on Friday. The primary market indicator has fallen from 32.66 to 29.80 points, bringing it below 30 points for the first time since June 2009. This fall was triggered by a significant deterioration of the IPO climate, as Deutsche Börse’s survey of market participants showed.

With a total of six IPOs, the primary market was busy between May and June, although no more so than average. The rather subdued mood on the primary market from mid-July, as a result of the euro zone debt crisis, has been reflected in high volatility on the equity markets. At the same time, a decline in the underpricing of IPOs is being seen. Underpricing is viewed as a signal of investors’ tendency to buy. It occurs when the first price determined by the market is higher than the issue price.

The lower share prices can currently be seen as a positive development from investors’ point of view. The survey of investors showed that their view of the attractiveness of market valuations was unchanged between April and July 2011, and remains at a relatively attractive level.

The IPO sentiment indicator was developed by the Center for Entrepreneurial and Financial Studies (CEFS) at the TU Munich together with Deutsche Börse. The indicator is compiled from surveys of market participants about the IPO climate and calculations by the TU Munich based on Deutsche Börse’s trading data. This mood barometer for the primary market is published quarterly and provides investors, issuers and banks a tool with which to assess the market situation.

The full report and further information are available at: boerse-frankfurt.de/sentiment