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This material has been produced by RBS sales and trading staff and should not be considered independent.

The Round Up

13 January 2010

Issue No. 252

The Round Up is a comprehensive daily note produced by the RBS Warrants

team providing an overview of market movements along with quality ideas forwarrant traders and investors.

In todays 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 Guidance confirms recovery

ASX (ASXKZI) MINI Trading Buy Strong November trading

Round Up Corner December Quarterly review

Equities

Move Last % Move Range Volume

ASX 200 -51.2 4899.5 -1.0% -51 to -51.u.c $2.8 bn(L)

SPI - yesterday -42.0 4891.0 -0.9% -54 to +2 22,053(L)

Dow Jones -36.7 10627.3 -0.3% -95 to -1 Avg

S&P 500 -10.8 1136.2 -0.9% -15 to -3 Low

Nasdaq -30.1 2282.3 -1.3% -40 to -14 Avg

FTSE -39.4 5498.7 -0.7% -78 to +12 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot -2.02 80.50 -2.4% +15.6%

Gold Spot -23.55 1128.30 -2.0% +1.1%

Nickel (LME) -8.71 799.56 -1.1% +6.7%

Aluminium (LME) -2.19 101.92 -2.1% +0.3%

Copper (LME) -5.03 336.93 -1.5% +9.3%

Zinc (LME) -4.39 110.86 -3.8% +8.0%

Silver -0.30 18.26 -1.6% +6.3%

Sugar +0.61 27.36 +2.3% +16.8%

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Dual Listed Companies (DLCs)

Move %Move Last AUD Terms Diff to Aus

NWS (US) -0.61 -3.7% 15.86 17.23 -51.0 c

RIO (UK) -65.5 p -1.8% 35.58 62.51 -1585.8 c

BLT (BHP UK) -48.5 p -2.3% 20.560 36.13 -736.2 c

BXB (UK) -6.5 p -1.6% 3.970 6.98 -10.4 c

American Depository Receipts (ADRs)

Move %Move Last AUD Terms Diff to Aus

BHP (US) -2.91 -3.6% 78.89 42.85 -63.8 c

AWC (US) -0.67 -8.8% 6.95 1.89 -7.3 c

TLS (US) -0.38 -2.4% 15.16 3.29 -1.6 c

ANZ (US) -0.56 -2.7% 20.20 21.94 -31.5 c

WBC (US) -3.19 -2.7% 113.62 24.69 -49.3 c

NAB (US) -0.90 -3.5% 24.50 26.62 -33.4 c

LGL (US) -1.30 -4.1% 30.79 3.34 -7.5 c

RMD (US) -1.41 -2.7% 51.43 5.59 -11.3 cJHX (US) +0.51 +1.3% 40.39 8.78 +8.6 c

PDN (CAN) -0.16 -3.9% 3.99 4.17 -8.1 c

Overnight Commentary

United States Commentary

Post the Alcoa miss, red ink overnight, particularly across the resource space and any stock viewed as a barometer foreconomic growth. The Dow had a brief look at positive territory mid morning, but since then, nothing but selling. Headinginto the last 30mins, DJIA down 50pts, the S&P 1% lower and the Nasdaq down 1.5%.

Resources - In line with after market trading yesterday, Alcoa down more than 11%, the Dow's worst performer and oneof the bigger pt takers. Higher energy and currency costs did the damage and the days fall erased 2010's gains and thensome. Elsewhere, Freeport down 3.3% and US Steels down 3% on high volume.

Growth - The Alcoa miss meant a reasonably severe case of the jitters across the bellwether growth names. Caterpillarthe biggest pts drag, giving back roughly half of the previous sessions gains down 3%, Intel down 2.5%, Dupont, Boeingand United Tech all trading 1.3% lower. The group accounting for roughly two-thirds of the days losses.

Homebuilders - KB Homes suffered its biggest single day fall in 3 months(-6%) despite a swing back into profit. NetIncome of $1.31 was well ahead of expectations, however, the numbers were largely a function of yet another tax changeand masked a 27% drop in revenue for the period. The all important new home order component fell shy of the streetsexpectation.

Banks - Not spared from what was a broad based sell-off, investment banks also weighed heavily. BofA down more then4%, JP's down 2.6%, Citigroup, Wells and Morgan Stanley all gave back around 3% and featured in the S&P100'sbottom 10.

Bonds//FX - With the nerves, came a push back into Treasuries, yields down 10 and 11bps on the 10yr and 30yrrespectively. The USD index more or less unchanged but the AUD gave back a full cent vs the greenback.

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United Kingdom & Europe Commentary

The FTSE shed 40 points last night with the mining and energy plays the hardest hit. Investors were banking profits lastnight as oil fell and fears the resource sector may have run too hard continued to loom. Retailers failed to save the marketas Tesco and J Sainsbury both posted better than expected Christmas sales. The market closed -0.7%, the DAX -1.6%and the CAC -1.1%.

UK Banks - With no material news on the wires the banks succumbed to the overall momentum of the market with the

sector finishing -0.6%. Lloyds, Barclays and HSBC closing -0.5%, -0.7%, -0.3% respectively.

Eco - The Chinese central bank stated it will increase capital requirements for banks by 50 basis points in a bid to curbinflation. This sparked fears that Chinas' growth may not continue at previous levels.Commodites Commentary

Miners - The miners were the hardest hit today as China implemented economic reforms to cool the economy. Fresnillo,Kazakhmys and Xstrata were all off between 3% and 5% with the major miners responsible for 20 of the 40 point loss.

Energy - Energy took a hit today as oil fell 2% with talks the current cold snap will ease this week. Royal Dutch and BPthe biggest points takers claiming 6 points between them and finishing -1.7% and -0.5% respectively. SPI Commentary

The SPI traded down 42pts or 0.85% to 4891. Open at 4934 with a high of 4958 and a low of 4879. Volume 23,951. Overnight the SPItraded down 56pt to 4841.

SPI Intraday SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week

Monday AUS

US

Tuesday AUS Aus investor housing finance

US

Wednesday AUS

US US trade balance

Thursday AUS Aus unemployment

US

Friday AUS

USUS retail sales, US CPI

*Dates are indicative only and may change

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MINI Trading Buy:

News Corp (NWSKZJ) USD rebound, more value in TV

NWS share price has bounced from low $15 to last closing price of $17.63. NWS remains a key RBS Research convictionbuy and believe it could break this trading range on its 3

rdattempt on market upgrades to earnings. NWS has been

weighted down on the falling USD index of late. The stock was well supported at this level and with a stabilising/rising

USD, NWS could break strongly from this level. RBS Research believes that the introduction of retransmission fees willadd a substantial uplift to the TV revenues and valuation. RBS Research has a $19.92 Target Price on NWS whichrepresents a healthy 31.4% upside. Get Long NWS with NWSKZJ.

Source: IRESS

Retransmission fees could be a share-price catalystNews Corp has indicated that it intends to try to start charging the cable, satellite and IPTV operators for the right toretransmit the Fox Network to their pay TV customers. We estimate potential additional revenue and operating profit forNews Corp of US$500m+ over a threeto four-year time-frame, which could help drive News Corps TV operating profitback up to US$1bn by FY14F (from only US$174m in FY09). etransmission revenues will take time to ramp up asagreements come up for renewal, but the announcement of an initial deal could be a catalyst for an overall re-assessmentof the valuation of News Corps TV assets.

Retransmission fees could add US$3.2bn+ to TV valuationWe currently value News Corps TV operations at US$3.8bn (8.5x FY11F EBITDA). We estimate that retransmissionrevenues of cUS$500m per annum would add US$3.2bn to our TV DCF valuation (equivalent to US$1.25 or A$1.40 per

share), with further upside if News Corp is able to achieve a rate per subscriber above that of CBS.

Buy rating and A$19.92 price target retainedWe believe guidance for FY10 operating profit growth of high single to low double digit is conservative and see potentialfor ongoing upgrades as the year progresses (we forecast growth of 16%). The stock looks cheap on both peer multipleand a sum-of-the-parts basis, with possible catalysts around retransmission deals and eventual capital management.

RBS MINIs over UGL

Security ExPrc Stop Loss CP ConvFac Delta Description

NWSKZJ 1157.22 1272 Long 1 1 MINI Long

NWSKZI 783.16 861 Long 1 1 MINI Long

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MINI Trading Buy:

Qantas (QANKZK) Guidance confirms recovery story

We called QAN a buy using QANKZK on the second dip to $2.55 in early December and have since seen the market re-rateQAN based on the recovery story. With November traffic strong, and December almost behind us, QAN has guided to 1H10PBT of between A$50m-150m. While operating conditions remain volatile, we believe the recovery in traffic and yields will

gather strength in 2H10. Our FY10F PBT sits at A$466m, with a heavy skew to 2H10. Buy maintained. Buy Long MINIQANKZK

Source: IRESS

QAN gives 1H10 PBT guidance in the range of A$50m-150mWith 1H10 almost complete, QAN has guided to first-half PBT in the range of A$50m-150m (vs no previous guidance).While operating conditions remain volatile, this gives us confidence in our full-year forecast PBT of A$466m (vsBloomberg consensus of A$434m), which implies a heavy skew towards 2H10 as the recovery in traffic and yields gaintraction. Upside risks to our forecasts include strengthening demand and quicker yield improvement..Traffic levels and yields showing improvementGroup load factor continued to improve in November, up 4.0pts to 82.3%, as Domestic loads increased 4.5pts (to 82.1%)and International loads increased 3.7pts (to 82.4%). Yields are also continuing their pattern of recovery. RBS Researchestimate that domestic yields in November declined 3.3% on pcp, versus -5.1% in October and -8.9% ytd. This recoveryreflects both improving demand and price increases over the past 8-10 weeks, and expect further recovery over

December/January as discount fares continue to wash through the system. International yields are also improving, albeitat a slower rate, due in part to the longer lead times for International travel. RBS Research estimate that Internationalyields declined 19.0% in November, versus -24.2% in October and -23.2% ytd. QAN implemented a 5% increase forInternational fares earlier this month paving the way for further recovery through 2010.

Confirmation of recovery thesis; Buy maintainedStrong load factors and yield improvement remain the key to improved profitability for QAN. With loads continuing to strengthen acrossQAN's operations, discounts washing through the system and price increases gaining traction, we expect to see further yieldimprovement, and hence improved profitability, over coming months. While QAN is now trading on 1.2x FY10F P/NTA (vs 1.3xhistorical average) we still see value in the stock at these levels and RBS Researchs target price of A$3.35 (based on 1.3x FY11FNTA).RBS MINIs over QAN

Security ExPrc Stop Loss CP ConvFac Delta Description

QANKZK 200 220 Long 1 1 MINI Long

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MINI Trading Buy:

Aust Securities Exchange (ASXKZI) Strong November trading

RBS Research have a Buy recommendation on ASX with a 12mth Target Price of $40. Yesterday ASX releasedNovember trading activity showing a surprisingly strong rebound to trading volumes in cash and deriviativeproducts. Cash equity volumes were in line with RBS Researchs forecast at 541k/day (up 31% on the pcp), while

futures & options volumes were up a sizeable 47% on an average daily basis. Furthermore, both primary andsecondary issuances remained healthy.

Get long ASX with ASXKZI for a valuation uplift to Target Price of $40.

Source: IRESS

Cash equities value traded up 19% on the pcp at A$5.1bnTotal average daily volume traded was 541k in November, up 31% on the pcp. The daily average value traded was up19% on the pcp to A$5.1bn (although this is down on the A$5.4bn in October). Overall we view these as strong numbersand remain confident that our forecast of A$6.0bn in average value traded for FY10 remains intact.

Futures & options November volumes up 47% on the pcpNovember was an exceptionally strong month for futures & options with average daily volumes up 47% on the pcp.Management attributed this strength to strong trading in 3-year treasury bond futures, as the contract has become thefocal point of liquidity across the yield curve. The uncertainty around future cash rates contributed to the volumes, as didthe high level of Commonwealth Government bond issuance (A$4.8bn).

ASX last traded $33.33, BUY ASXKZI for 1-for-1 upside towards RBS Target Price of $40.00

RBS SFIs over ASX

Security ExPrc Stop Loss CP ConvFac Delta Description

ASXKZI 2101.11 2415 Call 1 1 MINI Long

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RBS Round Up Corner:

Australian Strategy - December Quarterly

Equity markets continued to rally during the quarterDespite struggling to deliver positive returns during the first part of the quarter, the MSCI World Index finished the quarterin black. With investors adding more risk to their portfolios, the BRIC indices were the clear beneficiaries. Most equity

markets appear to be fully valued with double-digit forward PE multiples. Currently, the Russian equity index remains oneof the cheapest.

Government yield curves steepenWith investors gaining more confidence in the economic recovery, the long end of the treasury yield curve increasedduring the quarter and the lower end of the yield curve remained at near-zero levels. The US yield curve is at the steepestlevel since 2000, at 269bp.

Equity overviewFollowing two quarters of double-digit returns, the MSCI World Index returned 4% in the December quarter. Debt marketworries around Dubai World and Greek government bonds tested investor confidence in the early part of the quarter.However, improving signs for the US economy, the ongoing commitment from the government to maintain the fiscalstimulus and signs of stabilisation in the US housing market helped equity markets finish the quarter on a positive note.

The USD rally in December meant most equity markets had poor returns in USD terms. On a 12-month basis, emerging markets performed better than their developed world counterparts.

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Markets trading at a premiumMost of the major equity markets traded above their five-year historical average 12-month forward PEs in 4Q09. TheFTSE 100 and the European indices are trading at the highest premium to their long-run averages.

Bond overviewWith investors gaining confidence in the economic recovery, the long end of the treasury yield curve increased during thequarter. While the lower end of the yield curve remained at near-zero levels, the current US yield curve is at its steepestlevel since 2000. Chart 8 below shows the US treasury 10yr/2yr curves at their steepest since 2000 at 269bp.

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For further information please do not hesitate to contact us on the details below

Equities Structured Products & Warrants

Toll free 1800 450 005 www.rbs.com.au/warrantsTrading 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

accurate or complete and it should not be relied on as such. Any opinions, forecasts and estimates contained in this report are the views of RBS

Equities at the date of issue and are subject to change without notice. RBS Equities and its affiliated companies may make markets in the securities

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Copyright 2009. RBS Equities. A Participant of the ASX Group.

Explanation of Warrant Tables:

Security refers to the code ascribed to the warrant, ExDate refers to the date on which the warrant expires or is reset, ExPrc refers to the

exercise price, or second instalment payment, CP tells you whether the warrant is a call or a put, ConvFac the conversion factor of the warrant

which tells you how many warrants you need to exercise in order to take possession of 1 share, Delta tells you how much the warrant will move for a

1c move in the underlying security, Description Tells you the type of warrant.

All charts taken from IRESS unless indicated otherwise

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