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Deutsche Bank IPO indicator gives positive prognosis for IPOs in Frankfurt

The IPO climate, which reflects the sentiment of investors, companies and underwriters on the primary market, remained positive at 32.43 points in Q1 2013 compared to 32.8 points in the previous quarter, according to Deutsche Bank’s IPO sentiment indicator.

In contrast to global IPO activities, market participants in Frankfurt see a favourable period for placing shares and expect a positive price level for them in the coming months. The lower volatility and higher valuation of equities is also having a positive effect on the primary market.

According to the surveys, IPOs are primarily to be expected from March. This time window primarily arises from the fact that companies preparing for an IPO produce their financial statements by March, and from May onwards prepare their semi-annual reports.

Although the DAX index has risen, those surveyed no longer see the current price level as positively as they did as recently as three months ago, however expectations regarding the further development of share prices have risen. Nevertheless the price/earnings ratio, and thus an important key figure for share valuation, is still below its long-term average at 13.

The continuing low volatility of German blue-chip securities is having a lasting positive impact on the primary market. In the period under observation from the end of October 2012 to January 2013, the expected price volatility for DAX shares has fallen from 16 per cent to 13 per cent for a timeframe of 30 days, as measured by the VDAX-New, and with only minor fluctuations. A year ago the volatility was still at 40 per cent here; the long-term average is close to 20 per cent. One possible explanation for the impact of volatility on issue activity is the uncertainty that more marked share price fluctuations imply for issue proceeds and, as a result, the success of an IPO.

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