wmp 10 dec2012
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Weekly Markets
Perspectives
For important disclosures, refer to the Disclosure Section, located at the end of this report.
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Equity markets traded on a risk-on mode over the
last week. The Shanghai composite rose more than
4%, but remains one of the worst performing markets
since the beginning of the year.
At last week’s ECB press conference, President Draghi
said that the ECB had a discussion on rates which
included the topic of negative deposit rates.
Moreover, the ECB cut 2013 GDP growth forecasts to -
0.3% (from +0.5% previously).
The ECOFIN meeting ended without much progress
on EU bank supervision. Spain will receive €39.5bn in
bank recap funds from the EU by mid-December. The
much-awaited details of Greece’s buyback were also
announced.
The Bundesbank cut German 2013 GDP growth
forecast from 1.6% to 0.4%. 2012 GDP is expected to
grow 0.7%. Both the RBA (Australia) and the PNB
(Poland) cut interest rates over the last week.
Weekly SummaryIn the US, fiscal cliff negotiations are ongoing. In
terms of data, the week started with a
disappointing US ISM number (49.5 vs. 51.4
expected) and ended with the unemployment
rate falling to a near five-year low of 7.7%.
This week's two-day FOMC meeting, which
concludes on Wednesday, will probably dominate
the markets. Investors expect the Fed to replace
its expiring Operation Twist with an expansion of
its QE purchases.
However, US advanced retail sales, flash
manufacturing PMI for China, and Euro area flash
PMIs should also be closely watched.
In Portugal, Jerónimo Martins will hold
tomorrow its Investor’s Day. Given the GDP
slowdown in Poland and the tough macro
environment in Portugal, investors will look for
further visibility and an update on targets.
Portugal: Q3 2012 GDP fall 3.5%
y/y• The Portuguese real GDP fell 3.5% y/y in Q3
2012, a downward revision of 0.1 p.p. when
compared with the flash estimate;
• Domestic demand recorded a less negative
contribution for the y/y change rate of GDP (-
7.4% vs. -8.7% in Q2 2012);
• The positive contribution of net external
demand decreased to 3.9 p.p. (5.6 p.p. in the
previous quarter), reflecting a lower reduction
of Imports and a deceleration of Exports.
Portugal: Exports up 3.4% and
imports down by 0.6%• Exports of goods increased by 3.4% and imports
of goods decreased by 0.6% in the quarter ended
in October 2012, when compared with the same
period last year;
• The deficit of the trade balance decreased by
€441.4mn. The coverage rate stood at 76.9%, a 3
p.p improvement, when compared with the
coverage ratio of the period August to October
2011.
Source: Statistical Office of Portugal
Decomposition of GDP change rate (volume)
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Domestic Demand -5.2 -9.9 -6.8 -8.3 -7.1
Exports 6.1 6.2 8.2 3.7 1.7
Imports -4.4 -13.4 -5.4 -10.8 -8.2
GDP -1.8 -3.1 -2.3 -3.1 -3.5
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Domestic Demand -5.6 -10.7 -7.2 -8.7 -7.4
External Demand 3.8 7.7 4.9 5.6 3.9
GDP -1.8 -3.1 -2.3 -3.1 -3.5
Source: Statistical Office of Portugal
Year-on-Year change rate (%)
Contributes to GDP change rate (p.p.)
-12
-8
-4
0
4
8
12
65
75
85
95
105
115
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Greek GDP and Economic Sentiment
EC Economic Sentiment
Indicator (LHS)
GDP (% y/y, RHS)
-20
-15
-10
-5
0
5
10
15
-10
-5
0
5
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Components of GDP (%, y/y)
Gross Fixed Capital Formation
Household Consumption
Exports (RHS)
Euro-zone: Domestic Demand
vs. Net Trade
Source: Eurostat
• The detailed Q3 2012 GDP release confirmed
that the Euro-zone economy contracted by
0.1% q/q;
• Having fallen in the previous three quarters (-
0.4% q/q, -0.3% q/q and -0.5% q/q, in Q2 2012,
Q1 2012 and Q4 2012 respectively), household
consumption was stable in Q3 2012. Investment
showed a smaller contraction (-0.7% q/q) than
in Q2 2012 (-1.8% q/q) and Q1 2012 (-1.2%
q/q);
• Net trade made a positive contribution of 0.3%.
Greece’s debt buyback allows
some debt relief• €10bn of six-month EFSF notes will be used for the
debt buyback. A Dutch auction process was
concluded Friday for each of the 20 series of
outstanding new GGBs, with the average price of all
bonds being between €32.12 and €34.1;
• If successful, this could allow outstanding Greek
debt to fall by a net €20bn;
• German Chancellor hinted that Germany might one
day consider forgiving some of its outstanding loans
to Greece, if there is a substantial improvement in
the country’s fiscal performance.
Source: National Statistical Service of Greece and European Commission
-25
-15
-5
5
15
25
25
35
45
55
65
75
2005 2006 2007 2008 2009 2010 2011 2012 2013
German Industrial Production and manufacturing PMI
Industrial Production (% y/y, RHS)
Manufacturing PMI (Adv. 2 months, LHS)
Source: European Central Bank
• President Draghi repeated that the ECB is ready
to start buying bonds through its Outright
Monetary Transactions programme;
• He did not mention additional forms of policy
support such as quantitative easing. But, a
further interest rate cut as been discussed;
• The bank has become gloomier about the growth
outlook. The mid–points of its latest staff
forecasts imply that GDP will fall by 0.5% in 2012
and a further 0.3% in 2013, before rising by 1.4%
in 2014;
ECB reduces again its 2013 GDP
growth forecast
Bundesbank cuts German growth
forecast• The Bundesbank cut 2013 GDP growth forecast
from 1.6% to 0.4%. 2012 GDP is expected to
grow 0.7%;
• The bank is also forecasting lower inflation.
Inflation is expected to fall from 2.1% this year
to 1.5% in 2013. Unemployment should rise
slightly to 7.2% in 2013, from 6.8% this year;
• German industrial production fell 2.6% m/m in
October, much weaker than the consensus
forecast of -0.5%.
Source: Bloomberg
0.9
-0.1
1.2
2.0
2.3
2.72.8
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2011 2012 2013 2014 2015 2016 2017
Office for Budget Responsibility's latest GDP
Forecast (%)
Source: OBR’s Economic and Fiscal Outlook, December 2012
• The UK Autumn Fiscal Statement was released.
Public Sector Net Debt is now expected to peak
at 77.9% of GDP in 2015/16, a year later than the
previous prediction that it would peak at 76.3%
of GDP in 2014/15;
• The Office for Budget Responsibility's GDP
forecasts were revised down to -0.1% in 2012
(from 0.8%), 1.2% in 2013 (from 2%), 2% in 2014
(from 2.7%), 2.3% in 2015 (from 3%) and 2.7% in
2016 (from 3%);
• The UK Debt Management Office intends to
start issuing new super-long dated (50-60 year)
Gilts from next year.
UK fiscal watchdog revises down
GDP growth forecast
US unemployment rate declines
to 7.7%• Non-farm payroll employment increased by
146,000 in November. However, the gains in
September and October were revised down by a
total of 49,000;
• The unemployment rate declined to a near five-
year low of 7.7%, from 7.9%;
• The monthly gains in payroll employment have
been increasing since the middle of the year;
• The BLS reported that there was no significant
impact from Hurricane Sandy on the jobs
report.
US Employment Report
Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12
Unemployment rate (%) 8.1 8.2 8.2 8.3 8.1 7.8 7.9 7.7
Change in Non-Farm Payrolls (000s) 68 87 45 181 192 132 138 146
Average Hourly Earnings (%, y/y) 1.9 1.8 2 1.7 1.7 1.9 1.6 1.7
Average Weekly Hours Worked 34.5 34.4 34.5 34.4 34.4 34.4 34.4 34.4
Source: Bureau of Labor Statistics
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
30
34
38
42
46
50
54
58
62
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
ISM Manufacturing Index and GDP Growth
ISM Manufacturing
Index (Adv 1qtr, LHS)
GDP (% y/y, RHS)
US: ISM data for November -
Industry down… Services up…
Source: ISM Institute; Bureau of Economic Analysis
• The ISM manufacturing headline index fell from
51.7 in October to a three-year low of 49.5 in
November. Was the fall explained by the
temporary effects of storm Sandy?
• Both the new orders index (50.3 vs. 54.2) and
the employment index (48.4 vs. 52.1) fell;
• The US ISM non-manufacturing index rose in
November to an eight-month high of 54.7. It
seems to suggest that activity in the services
sector has not been hit by fiscal cliff concerns.
US consumer sentiment drops in
December• The University of Michigan consumer sentiment
index’s headline fell to 74.5 in the preliminary
December report;
• It appears that concerns and uncertainty related to
the fiscal cliff weighed on consumer sentiment
during the month;
• Sentiment regarding government economic policy,
expectations for unemployment, and income
expectations all weakened;
• The survey also reported increases in consumer
inflation expectations.
University of Michigan sentiment index
Prelim.
May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Consumer sentiment 79.3 73.2 72.3 74.3 78.3 82.6 82.7 74.5
Current conditions 87.2 81.5 82.7 88.7 85.7 88.1 90.7 89.9
Expectations 74.3 67.8 65.6 65.1 73.5 79.0 77.6 64.6
Median 1-year-ahead inflation expectations 3.0 3.1 3.0 3.6 3.3 3.1 3.1 3.3
Median 5-year-ahead inflation expectations 2.7 2.8 2.7 3.0 2.8 2.7 2.8 2.9
Home buying conditions 160 159 157 157 165 155 162 158
Source: University of Michigan
4.25
3.0
3.4
3.8
4.2
4.6
5.0
2009 2010 2011 2012 2013
NBP base rate (%)
2%
3%
4%
5%
6%
7%
8%
2008 2009 2010 2011 2012
RBA Overnight Cash Rate Target
Australia: RBA cuts 25bp.
Further cuts are possible
Source: Bloomberg
• The RBA cut the cash rate by 25bp to 3%;
• The statement attached to the decision
doesn’t seem to signal that the RBA's easing
cycle is complete. It mentions that
“commodity prices for Australia remain
significantly lower than earlier in the year“
and “inflation remains relatively benign and
consistent with target”;
• The next meeting will be held in February
2013. RBA will probably follow closely
indicators in the non-mining economy.
Poland: a 25bp cut was announced.
Another cut in January is possible• The Polish MPC cut rates again by 25bp, as expected
by the market;
• The reasons for the cut were expectations of growth
remaining below potential in the medium term, the
risk that inflation may fall below the target in the
medium term, slowing credit growth, and worries
about a sharp slowdown in domestic consumption
dynamics;
• The statement repeated that the MPC will cut more
if the incoming data confirms a growth slowdown
and the risk of inflation pressures stays limited.
Source: National Bank of Poland
• ZON (ZON PL) and Sonaecom (SNC PL) rose 6.15% and
2.97%, respectively, amid further speculation that both
companies could merge. We continue to believe that a
merger could allow material cost sinergies and provide a
more credible competitor to Portugal Telecom (PTC PL);
• EDP Renovaveis (EDPR PL) and Energias de Portugal
(EDP) rose 5.66% and 8.12% over last week, respectively.
EDP Renovaveis has commissioned its first wind farm in
Italy. China Three Gorges, EDP's largest shareholder with
a 21.35% stake, reaffirmed its interest in reinforcing its
current stake by acquiring the 4.14% that the Portuguese
state still owns in EDP. EDP Renováveis expects the first
deal with CTG until year-end;
• Galp (GALP PL) fell 0.38%, underperforming the
Portuguese Benchmark PSI 20 (3.42%). The company
announced new natural gas discoveries in Mozambique,
which represents another resource upgrade for Area4;
• Portugal Telecom (PTC PL) rose 0.36% over the week.
Societe General (GLE FP) now holds a long position of
more than 2% of the company. The stake is the result of
the transaction of a cash settled equity linked swap.
PSI20 weekly review
Source: Bloomberg
25
30
35
40
45
50
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Freeport McMoRan Share Price ($)
31.7
15.21
14
15
16
17
18
19
20
21
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
GDF Suez Share Price (€)• GDF Suez (GSZ FP) provided a strategic update. The
company reiterated its policy to maintain or grow the
dividend (2012 dividend at €1.5/share was confirmed).
However, GDF Suez said that earnings will fall 17% in
2013 and remain flat in 2014. In order to strenghten its
balance sheet, the company intends to make further
asset sales (c. €2.5bn), cut annual capex and implement a
cost reduction programme. More visibility on earnings
growth post 2014 will probably be needed for the stock
to perform;
• Deutsche Telekom (DTE GY) presented a new set of
2013-15 targets. Higher levels of investment in the
German and US markets were announced. In order to
protect the balance sheet, 2013 and 2014 dividends will
be cut to €0.50 and an option for investors to take the
dividend in stock rather than cash will be introduced;
• Freeport McMoRan (FCX US) fell 18.5% over last week.
The company has signed merger agreements under
which it will acquire Plains Exploration (PXP US) for
$6.9bn in cash and stock and McMoRan Exploration
(MMR US) for $3.4bn in cash.
Last week’s market highlights
Source: Bloomberg
What we are watching this week:• In Europe, the key developments
this week are likely to be politically
focused. On Thursday and Friday
(Dec 13th, 14th), EU leaders will
meet to discuss a roadmap to
gradually set up a better
functioning economic and
monetary union. On Wednesday
(Dec 12th), EU finance ministers
meet to discuss the single
supervisory mechanism, and on
Thursday (Dec 13th), euro area
finance ministers will discuss the
results of the Greek buy back;
• In terms of data, the focus will be
on the flash PMIs for December;
• In the US, this week's two-day
FOMC meeting will probably
dominate the markets;
• HSBC Flash Manufacturing PMI for
China will be released Friday.
CALENDAR - Event Country Date Hour (GMT) Survey Prior
China CPI and PPI (Nov) China 9-Dec n.a. n.a. n.a.
China ind prod and retail sales (Nov) China 9-Dec n.a. n.a. n.a.
Exports y/y (Nov) China 10-Dec n.a. 9.0% 11.6%
Imports y/y (Nov) China 10-Dec n.a. 2.0% 2.4%
CBR monetary policy meeting Russia 10-Dec n.a. n.a. n.a.
Bank of England's Mervyn King speech UK 10-Dec n.a. n.a. n.a.
Bank of France Bus. Sentiment France 10-Dec 07:45 92 92
Industrial Production y/y France 10-Dec 07:45 -2.3% -2.5%
ZEW Survey (Current Situation) (Dec) Germany 11-Dec 10:00 6.0 5.4
ZEW Survey (Econ. Sentiment) (Dec) Germany 11-Dec 10:00 -11.5 -15.7
Trade Balance (Nov) US 11-Dec 13:30 -$42.7B -$41.5B
Machinery Orders y/y (Oct) Japan 11-Dec 23:50 -5.0% -7.8%
Consumer Price Index y/y Germany 12-Dec 07:00 1.9% 1.9%
Consumer Price Index y/y France 12-Dec 07:45 1.6% 1.9%
ILO Unemployment Rate (Nov) UK 12-Dec 09:30 7.8% 7.8%
Euro-Zone Ind. Prod. y/y Euro-Zone 12-Dec 10:00 -2.4% -2.3%
EU finance ministers meet on Banking Supervision Europe 12-Dec n.a. n.a. n.a.
FOMC Rate Decision US 12-Dec 17:30 0.3% 0.3%
Bank of Korea Monetary Policy Committee Meeting South Korea 13-Dec 01:00 2.75% 2.75%
Consumer Price Index y/y Spain 13-Dec 08:00 2.9% 2.9%
Eurogroup finance ministers meet for talks on Greece and Cyprus Euro-Zone 13-Dec n.a. n.a. n.a.
Advance Retail Sales (Nov) US 13-Dec 13:30 0.4% -0.3%
Retail Sales Less Autos (Nov) US 13-Dec 13:30 0.0% 0.0%
Producer Price Index (YoY) US 13-Dec 13:30 1.8% 2.3%
PPI Ex Food & Energy (YoY) US 13-Dec 13:30 2.2% 2.1%
EU summnit (two days) Europe 13-Dec n.a. n.a. n.a.
Initial Jobless Claims US 13-Dec 13:30 370K 370K
Continuing Claims US 13-Dec 13:30 3215K 3205K
SNB policy Decision Switzerland 13-Dec n.a. n.a. n.a.
HSBC Flash Manufacturing PMI China 14-Dec 01:45 n.a. 50.5
PMI Manufacturing (Dec) France 14-Dec 08:00 44.9 44.5
PMI Services (Dec) France 14-Dec 08:00 46.0 45.8
PMI Manufacturing (Dec) Germany 14-Dec 08:30 47.3 46.8
PMI Services (Dec) Germany 14-Dec 08:30 50.0 49.7
PMI Manufacturing (Dec) Euro-Zone 14-Dec 09:00 46.6 46.2
PMI Composite (Dec) Euro-Zone 14-Dec 09:00 46.9 46.5
PMI Services (Dec) Euro-Zone 14-Dec 09:00 47.0 46.7
WPI Inflation (Nov) India 14-Dec n.a. n.a. n.a.
Tankan business conditions DI (Dec) Japan 14-Dec n.a. n.a. n.a.
Euro-Zone CPI y/y Euro-Zone 14-Dec 10:00 2.2% n.a.
Consumer Price Index y/y (Nov) US 14-Dec 13:30 1.9% 2.2%
CPI Ex Food & Energy y/y (Nov) US 14-Dec 13:30 2.0% 2.0%
Markit US PMI Preliminary US 14-Dec 13:58 52.0 52.4
Industrial Production US 14-Dec 14:15 0.2% -0.4%
Capacity Utilization US 14-Dec 14:15 78.0% 77.8%
Japanese general elections Japan 16-Dec n.a. n.a. n.a.
-0.7
0.7
1.0
1.3
-0.3
-0.8
0.90.8
1.2
0.0
-1.0
-0.5
0.0
0.5
1.0
1.5
Jun-12 Jul-12 Aug-12 Sep-12 Oct-12
US Retail Sales (% m/m)
Retail Sales Core Retail Sales (Less Autos)
Next Week Preview: Economics
Source: Bloomberg
• US retail sales for November will be released
Thursday, 13th December (13:00 GMT). In October,
retail sales were depressed by Hurricane Sandy. A
bounce back will now probably occur, driven by a
rebound in auto and building materials;
• US consumer prices are due Friday, 12th December
(13:30 GMT). The recent fall in gasoline prices will
probably keep headline CPI inflation rate below the
Fed’s 2% target. However, the housing cost
components are expected to continue rising,
reflecting the strengh of recovery in real estate;
• UK labor statistics will be released Wednesday, 12th
December (9:30 GMT). After the 10k increase in the
claimant count in October, the November data will
be important to see if we have reached a turning
point in labor market momentum;
• Euro area flash PMIs are due Friday, 14th December
(8:58 GMT). Given the stabilization of economic
indicators outside Europe, Euro area PMIs could
advance a bit in December.
Source: Bloomberg
42
46
50
54
58
62
42
46
50
54
58
62
2010 2011 2012 2013
Euro-zone PMI Surveys
Manufacturing
Composite
Services
Source: Federal Reserve
• The Fed doesn´t seem to have much more short-
term Treasury securities to sell. The Fed is likely to
announce the replacement of its expiring
Operation Twist at the end of the FOMC meeting
that concludes on Wednesday;
• The focus will also be in a possible announcement
that the Fed will adopt numerical thresholds for
its guidance on how long its short-term rates will
remain at current low levels. Fed officials will also
disclose an update on their economic forecasts.
Next Week Preview: FOMC Meeting and EU leaders meetingFED: More QE on the way?
• EU leaders will meet on Dec 13th and Dec 14th to
discuss a roadmap (with three stages of
integration) towards a better functioning financial,
budgetary and economic policy framework.
However, there is a difficult road ahead. Solidarity
and control mechanisms will probably require
changes to the EU treaties. With the German
federal election next year, bold moves are not
expected and tough decisions will likely take place
later on;
• On Dec 12th, EU finance ministers will discuss the
legal framework on the single supervisory
mechanism, an important step towards a full
banking union;
• On Dec 13th, euro area finance ministers will
discuss the results of the Greek debt buyback,
which will determine if the tranches of aid can be
released. The aid package to Cyprus could also be
discussed, as the audit to the local banking sector
will reveal how much money the country needs.
Euro politics are back on the agenda
90
95
100
105
110
115
120
125
90
95
100
105
110
115
120
125
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
Jerónimo Martins vs. DJ STOXX 600 Retail Index
Jerónimo Martins Share Price
DJ STOXX 600 Retail Index
1 Jan 2012 = 100
Next Week Preview: Jerónimo Martins Investor’s Day
Will it be a trigger for the stock
price ?• Jerónimo Martins will hold its Investor’s Day on
December 11st;
• This should be an interesting event for investors.
Given the GDP slowdown in Poland and the tough
macro environment in Portugal, investors will look
for further visibility and an update on targets;
• JM’s “LfL” performance in Poland and possible
new targets in terms of new stores post-2015
could be an important part of the Q&A session;
• Management could also give an update on the
“Hebe” drugstore trials in Poland;
• Investors are also willing to ear more specific
information on JM’s venture in Colombia. The
company has already announced that 30 to 40
stores should be opened in 2013. Will the
company provide further targets?
• A clarification on the company’s strategy in
Portugal will also be closely watched. Declining
disposable income is pressuring retail sales
evolution. How is the company seeing the
competition in the Portuguese retail market? Does
the company expect its “LfL” to remain above that
of the market? What impact on profitability should
be expected from this positioning?
Source: Bloomberg
P/E 13 Est. DY 13 Est. EPS CAGR
11/13 Est.
Jerónimo Martins 19.5 2.7 17.4%
Metro 8.6 6.7 3.3%
Ahold 9.7 4.8 5.6%
Dia 14.9 3.1 46.5%
Carrefour 13.6 3.1 0.46%
Sainsbury (*) 10.9 5.1 5.9%
Morrison (*) 9.5 4.8 5.1%
Tesco (*) 10.0 4.6 1.5%
(*) P/E 14 Est., DY 14 Est., and EPS CAGR 12/14 Est. were used
Source: Bloomberg
Next Week Preview: European corporate events and Idea of the week
Inditex to release Q3 results• Inditex will report Q3 results Wednesday. The
main driver should be “LFL”, after positive
comments at the Q2 stage on current trading;
• ThyssenKrupp will release FY Results and hold an
analyst meeting on Tuesday.
Company Sector Event
December 10th
Air France - KLm Airlines Investor Day
December 11th
Diageo Beverage North America Presentation
ThyssenKrupp Mining & Metals FY Results
Lufthansa Airlines Traffic Statistics
Jerónimo Martins Retail Investor Day
Whitbread Leisure Goods & services Q3 Trading Statement
Metso Industrial Equipment Capital Markets Day
Serco Group General industrial Services Capital Markets Day
December 12th
Inditex Retail Q3 Results
Fraport Industrial Transportation Traffic Statistics
Imagination Tech Semiconductors H1 Results
Carillion Heavy Construction Q4 Trading Statement
Travis Perkins Retail Trading Statement
December 13th
Pernod Ricard Beverage Americas Seminar
Wood Group Energy Trading Statement
December 14th
Fresenius Healthcare Providers Update on plans for biotech business
Is a weaker JPY still possible?• The LDP, led by former prime minister Shinzo
Abe, appears to be the front-runner in the early
stages of the current general election campaign.
The LDP-led coalition (with coalition partner
Komeito) could control the lower house;
• Japan’s December 16th election could result in a
significant shift in BoJ policies;
• A formal inflation target of 2-3% would be an
important step towards weakening the yen, but
the target’s credibility depends on the size of
asset purchases;
• As part of its election platform, the LDP wants
to establish a public-private investment fund for
purchasing of foreign bonds that would help to
bring the currency down. The adoption of a
negative interest rate is also being discussed;
• Yen short positioning has built up considerably
in recent weeks. Nevertheless, a move on the
USDJPY and EURUSD towards 84 and 110,
respectively, seems possible.
0.3
0.4
0.5
0.6
0.7
0.8
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
Sonae (SON PL) Share Price (€)
0.664
Source: Bloomberg
Charts we are watching (I)• According to the Portuguese Statistical Office,
adjusted by seasonality and calendar effects, food
retail sales dropped by 2.6% y/y in October at current
prices (-1.7% ytd) and non-food retail sales (ex-fuel)
dropped by 12.1% yoy (-11.0% ytd). Nevertheless,
Sonae (SON PL) rose 13.7% over last week and was the
best performer stock in the PSI 20 benchmark index.
Notwithstanding the weak macro backdrop, the
company has been able to show a resilient
performance in its food retail division. Moreover,
Sonae would also benefit in a M&A scenario
involving Sonaecom and ZON.
• Repsol (REP SM) filed a US lawsuit to block Chevron
(CVX US)’s deal with Argentina’s YPF, in what
represents the Spanish oil company’s legal response
to the loss of its asset in Argentina. Moreover, GDF
Suez (GSZ FP) said that it is studying the acquisition of
Repsol’s LNG assets. The divestment of the LNG
business should address most credit agency concerns.
But, Repsol’s future upstream growth will probably
be the main driver of its stock price.Source: Bloomberg
15.855
10
12
14
16
18
20
22
24
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13
Repsol (REP SM) Share Price (€)
43
-3
0
24
71
25
9
-13
-25 -26
16 13 13
30
16
-51
33
-10
-28
-1
-60
-40
-20
0
20
40
60
80
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
PSI 20 Yearly Price Changes (%)Source: Bloomberg
Charts we are watching (II)• Gemalto (GTO FP) will replace Alcatel-Lucent in the CAC
40. The change will be effective December 24th. Alcatel-
Lucent as been in France’s benchmark stock index in the
last 25 years. Moreover, Gemalto will seek a secondary
listing on the Amsterdam exchange in 2013. The
company is also considering a listing in the US or Asia.
Gemalto closed Friday at €74.59, the highest level since
the company’s listing in May 2004. Gemalto is strongly
positioned for several technology build-out cycles.
However, the company will need to continue to execute
on product cycles and to show improved cash
conversion in order to justify continued
outperformance.
• The Portuguese PSI 20 stock benchmark index has
recovered strongly from its 2012’s lows. The index is
down only 1% since the beginning of the year.
Portuguese stocks have been re-rated, reflecting the fall
in sovereign yields in Portugal since the highs posted in
January 2012, despite poor economic prospects. With
valuation already reflecting challenges faced by the
country, should we expect a further re-rating in 2013?Source: Bloomberg, 2012 reflects ytd change
0
50
100
150
200
250
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12
Alcatel-Lucent (ALU FP) vs. Gemalto (GTO FP)
Gemalto
Alcatel-Lucent
1 Ja n 2011 = 100
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