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The Round Up
15 December 2009
Issue No. 239
The Round Up is a comprehensive daily note produced by the RBS Warrants
team providing an overview of market movements along with quality ideas for
warrant traders and investors.
In today’s issue
Global Market Action Scoreboard, commentary
Aussie Market Action SPI Comment, Events & Dividends
NWS (NWSKZJ) MINI Trading Buy USD rebound, more value in TV
QAN (QANKZK) MINI Trading Buy – Strong load factors
ASX (ASXKZI) MINI Trading Buy – Strong November trading
Round Up Corner Banks Update – ANZ,CBA,NAB,WBC
Equities
Commodities
Overnight Commentary
United States Commentary
Like we saw here yesterday afternoon, investors took comfort in Abu Dhabi's $10bln pledge, although the Exxon news
meant the move from the Dow was good without being spectacular. Heading into the bell, the Dow is up 25pts led by
growth and financials, the S&P up 0.6% and the Nasdaq 0.8% higher.
Bellwethers - With comfort around the Dubai situation and default swaps declining, the market pushed back into the
growth names. Caterpillar up 1.6%, so too Dupont, Alcoa 1.3%, HP up 1.2% and Microsoft 1% higher. All of the
aforementioned in the Top10 and accounting for more than half the days gains.
Energy - Exxon's bid for XTO left more than a few pundits assuming the deal would be the first of many. Devon Energy
up over 5% and the S&P'100's best, Cabot Oil up 8% and Chesapeake Energy Trading 6% higher.
Tobacco - Philip Morris up over 3.5%, one of the S&P100's top performers after one broker added the stock to their high
conviction list. Also pushing through an upgrade to price target, the broker argued the market is underestimating the
groups potential for growth next year.
Energy - Exxon down 4.5%(stripping 25pts from the Dow) on news the biggest oil company in the US agreed to buy XTO
Energy Inc for $31bln. Assuming the all-stock transaction goes ahead, Exxon will assume control of the largest producer
of US natural gas. XTO jumped 15% on the news.
Financials - Citigroup nearly 7% lower and the S&P500's worst, on news mgmt had reached an agreement with the
Treasury to repay $20bln in TARP funds. Plans are for a $20.5bln equity issue , with the possibility of a further $3bln
worth of notes in Q1 2010.
UK Banks - Concerns over the Dubai debt problems eased. Standard Chartered was helped by a broker upgrade and
continued its solid run up 4.3%, HSBC added 2.4%, Barclays was up 1.3% and RBS rose 1.4%. Lloyds fell 1.9% though
after completing its £13.5bn raising.
Euro Banks - The Dubai news and speculation that the Greek PM may announce measures to reduce the budget deficit
helped sentiment. Deutsche Bank rose 3.4%, Commerzbank added 0.6%, BNP was up 0.9%, SocGen climbed 1.1% and
Greek banks bounced.
Financials - LSE jumped 9.9% as worries that shareholder Dubai Bourse might have to sell its stake in the British firm
receded. LSE also talked about offering futures and options in direct competition to the Liffe (owned by NYSE Euronext).
Insurers Prudential, Aviva, and Standard Life added between 0.1% and 2.7%.
Auto - Continental rose 3.6% after a broker note cited expected benefits from a planned capital raising. Daimler, which is
partly owned by Abu Dhabi’s Aabar Investments, added 2.25%.
Commodites Commentary
Miners - Firmer metal prices and strong confidence post the China data last week saw the miners higher. BHP rose
1.7%, Rio was up 1.3%, Anglo added 3%, Xstrata climbed 2.6% and Vedanta ended 1.8% higher.
Energy - Oil majors BG Group, BP and Shell added between 0.9% and 1.6%, despite a slightly weaker crude price.
Exxon announced it would buy XTO Energy and Shell has continued its asset sales this time offering its Swedish arm.
SPI Commentary
The SPI traded up 42pts or 0.9% to 4659. Open at 4614 with a high of 4662 and a low of 4606. Volume 45,598. Overnight the SPI
traded down 1pt to 4656.
*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS
Source: IRESS
Source: IRESS
Get long ASX with ASXKZI for a valuation uplift to Target Price of $40.
Source: IRESS
ASX last traded $33.33, BUY ASXKZI for 1-for-1 upside towards RBS Target Price of $40.00
Sector performance
Banks' PE relative (to All Ords) is back down to 86%, having underperformed the market over the last month. While this is
above the long-run average, given short-term structural advantages, we believe the sector can trade at a premium. The
banks are now trading at an average PE of 13.5x FY10F on IBES consensus.
Investment view – RBS Research prefer ANZ and NAB to WBC and CBA
As a result of a normalising earnings cycle, we believe relative valuation will again play a significant role in the relative
performance of stocks in the sector. RBS believe ANZ and NAB still have the greater share price upside potential over
the next six to 12 months, given their 1-2 PE point discounts.
For further information please do not hesitate to contact us on the details below
Contact
Equities Structured Products & Warrants
Toll free 1800 450 005 www.rbs.com.au/warrants
Trading Products Team
Ben Smoker 02 8259 2085 ben.smoker@rbs.com
Ryan Corrigan 02 8259 2425 ryan.corrigan@rbs.com
Investment Products Team
Elizabeth Tian 02 8259 2017 elizabeth.tian@rbs.com
Tania Smyth 02 8259 2023 tania.smyth@rbs.com
Robert Deutsch 02 8259 2065 robert.deutsch@rbs.com
Mark Tisdell 02 8259 6951 mark.tisdell@rbs.com
Disclaimer:
The information contained in this report has been prepared by RBS Equities (Australia) Limited (“RBS”) (ABN 84 002 768 701) (AFS Licence No
240530) (“RBS Equities”) and has been taken from sources believed to be reliable. RBS Equities does not make representations that the information is
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