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Fewer U.S. IPOs Going into Russell Index

NEW YORK (Reuters) – The annual reconstitution of the Russell Investments family of global stock indexes next month is expected to bring a further decline in the number of U.S. initial public offerings added to the Russell Global Index while non-U.S. IPOs take up the slack.

“This year may mark the largest gap in the 10-year history of the global index between U.S. and international IPO additions,” Mark Thurston, head of global equity research at Russell, said in a statement on Friday.

Thurston said that U.S. IPOs added to the Russell 3000 Index .RUA since the 2007 reconstitution totaled 84, or about 24 percent of the 345 global IPO additions. IPOs are added on a quarterly basis.

The Russell 3000 is the U.S. component of the Russell Global Index, which has about 10,000 securities from more than 60 countries.

In 2007, 151 U.S. IPOs were added to the global index, or about 27 percent of the 566 added to the global index.

In 1997, there were 226 U.S. IPOs added, or 44 percent of the 519 added globally.

Thurston said that IPO activity tells how well particular markets are doing in terms of real demand for goods and services. They also show where opportunities for growth were being created and where companies were able to take advantage of favorable market conditions to go public.

“No doubt ongoing concerns about a potential recession in 2008 have dampened the willingness of some U.S. companies in particular to go public in the past few quarters,” Thurston said.

He said the first quarter of 2008 was particularly slow as only a dozen U.S.-based IPOs went into the Russell 3000, while nine Chinese IPOs were added to the global index. 

In addition to the U.S., other countries with a smaller share of global IPO activity over the past decade include Malaysia, Hong Kong and Taiwan.

At the same time, Brazil, Russia, India and China, often referred to as the BRIC countries, had a combined 118 IPO additions in 2007, up from only 20 in 1997.

Russell Investment Group is headquartered in Tacoma, Washington, and is a subsidiary of Northwestern Mutual Life Insurance Co.

(Reporting by Cal Mankowski; Editing by Andrea Ricci)