(SG) M&A Update - see list of sectors & Stocks - pdf attached

* The European economy is recovering, so companies may be more willing to take M&A risks again;
* Company balance sheets have been rebuilt, thus allowing companies to partly finance M&A by debt in a very favourable environment;
* Pricing power is under pressure with the result that companies need to react to and shape the competitive landscape. The low inflation environment means many industrial sectors may be facing deflation. When deflation is coupled with very low growth, companies need to 1) reduce pricing pressure and 2) find new ways to grow if they want to deliver the EPS growth expected by the market. As we discussed in our previous report, we believe that pricing power is probably the most convincing argument in favour of M&A. The paradox is that this argument can almost never be used as it would trigger inquiries by anti-trust bodies. As a result, companies often choose to present very high synergies to justify these deals. Most of the time, these synergies are clearly overestimated and often calculated backwards, i.e. companies calculate the amount of synergies needed to justify a deal in the absence of a price effect. We believe we are at the beginning of this M&A wave which will continue this year and next. We have observed the usual M&A cycle described in the note

(NY Post) NY attorney general probes Herbalife: sources

New York Attorney General Eric Schneiderman is investigating Herbalife over claims it is a pyramid scheme, The Post has learned.
At least two whistleblowers have come forward and given Schneiderman’s investigators sworn testimony, sources said.
The New York lawman has also fielded complaints from former Hispanic Herbalife distributors who say they were defrauded by Herbalife, sources said.
A spokesman for Schneiderman declined comment.
The Los Angeles distributor of nutritional supplements is already the subject of federal civil and criminal probes over pyramid-scheme allegations.
A report on Friday that the FBI and Manhattan US Attorney Preet Bharara had launched criminal probes of the $5 billion multilevel marketer — which sells its products worldwide through a network of 3 million-plus distributors — spooked investors and sparked a 17 percent stock sell-off.
Shares partially recovered on Monday, climbing about 4.4 percent in heavy mid-afternoon trading.
In March, the Federal Trade Commission confirmed a published report that it was investigating the company. The Securities and Exchange Commission also has an open inquiry, which Herbalife has acknowledged in public filings.
Herbalife, which denies it is a pyramid scheme, was blind-sided by news of the criminal investigation.
Executives had not been informed by the FBI of the probe, the company said. The 34-year-old company, in fact, denied it was under an investigation.
The criminal probe, first reported by the Financial Times, was independently confirmed by at least nine other media outlets, including The Post.
Herbalife has been bracing for action on the state level because activist investor Bill Ackman, who bet $1 billion Herbalife was a fraud 16 months ago, last year told The Post and other media that his Pershing Square hedge fund had contacted at least eight state attorneys general in its quest for a regulatory probe.
Ackman declined further comment.
Schneiderman has been the subject of an intense lobbying effort by both anti-Herbalife and pro-Herbalife forces, according to people familiar with the situation.
Herbalife hired law firm Dickstein Shapiro to lobby state attorneys general on its behalf, said sources close to the situation, who noted that Schneiderman is a top focus of that effort.
Dickstein gave $30,000 to the Democratic Attorneys General Association in the 2012 election cycle. Herbalife donated another $10,000 to the group in May of last year.
Last week, Herbalife raised the stakes, hiring political advisory SKD Knickerbocker Group, where Schneiderman’s ex-wife, Jennifer Cunningham, a powerful state lobbyist, is a managing director. Cunningham, the former legal counsel to state Assembly Speaker Sheldon Silver, previously advised Schneiderman in his campaign for attorney general.
Cunningham will not be on the Herbalife account, Herbalife said.
“They [SKD Knickerbocker] are not lobbyists and do not communicate with state attorneys general or elected officials on [Herbalife’s] behalf, nor will they in the future,” the company said in a statement.
It declined to comment on the Schneiderman probe.
Those anti-Herbalife groups asking the AG for a probe include Make the Road New York, a community group, which in its survey of hundreds of Hispanic New Yorkers found none who made any money in their pursuit of the Herbalife business opportunity.
Several New York Democrats, including City Council Speaker Melissa Mark-Viverito, State Sen. Adriano Espaillo and Council member Julissa Ferreras have also asked Schneiderman for a probe.
In 2013, New York had one of the largest numbers of Herbalife distributors in the US, according to company records. Only California, Texas and Florida had more.
New York City’s boroughs of Queens, Brooklyn and The Bronx also have high concentrations of Herbalife nutrition clubs, which critics, including Ackman, claim are used to recruit Herbalife distributors.
There are 3,000 nutrition clubs in the tri-state area, an Herbalife executive told The Post.
In a pyramid scheme, most distributors’ profits come from recruitment, not from selling product to customers outside the network. New recruits are constantly necessary to keep the scheme afloat, as most of them will lose money and leave.

(BofA-ML) Fund Manager Survey (Global-Europe-EM&ASIA)

>>> Europe
- Europe preferred but sentiment is waning
European equities remain the most preferred region by global investors, however
sentiment dropped to an eight month low in April and sentiment appears to be
waning. Global investors’ intentions to overweight European equities fell to a net
23% overweight down from net 35% in March
- Out of Europe into EM
The intention of global investors to own EM equities improved to a one year high
just as sentiment towards European stocks appears to be waning. The shift in
sentiment towards EM over Europe looks similar to the early stages of the rotation
seen back in 2007. European investors however remain positive on growth keeping
their positioning in favour of cyclical over defensive sectors.
- Sentiment towards EM proxies improving
Improving sentiment towards EM fed into rising positioning in EM proxies in Europe.
EM consumer exposed sectors such as Personal good and Food / Bev saw the
biggest improvement over the month along with Oil and Gas and Basic Resources.
- Higher Growth expectations justify pro-cyclical bias
Growth expectations in Europe improved to a net 68% believing in a stronger
economy, up from 59% in March. Higher growth expectations justify their procyclical
sector bias although sector convictions have dropped to record lows. Autos
(net 16% OW), Energy (14%) and Industrials (11%) are the most preferred sectors
while Retail (32% UW), Utilities (27%) and Food and Beverage (22%) are the least
preferred sector. Of these pair trades our preferred contrarian trade is long Food
and Bev over Autos.


>>> EM & ASIA
- GEM allocations improve as China growth bounces
Global investors have reduced their extreme UW position in EM equities. And the
asset class is perceived to be the most undervalued in 13 years (Chart 1). But
global investors are nowhere near an OW position in EM. Stronger Chinese growth
expectations (they bounced in April) required for further allocation to EM stocks.
- GEM investors OW Russia
As China contagion and geopolitical risks fade EM investors move back OW Russia
& China. They remain UW Turkey & Brazil. By sector, GEM investors are OW Tech
& Discretionary and continue to ignore late-cycle cyclicals, supporting Ajay Kapur’s
view that EM growth stocks are over-owned versus value
- Asia investors rotate to Australia
QE withdrawal fear means investors cut ASEAN positioning in April and rotate to
Australia (biggest OW since March 2011) and maintain OW positions in Korea and
Taiwan. Banks hit all-time low in positioning, while Tech and Industrials remain most
loved.

>>> Global
- Bottom line: investors cut “tails” but stay long risk
Investors have "tapered" their extreme Q1 positions in EM & growth stocks; cash
levels remain high; but March/April sell-off has not induced big reductions in tech
exposure, equity exposure & hedge fund leverage.
- We want capex!
62% expect stronger macro next 12 months (though only 23% expect a boom); 58%
want companies to spend more on capex, while % favoring buybacks & M&A fall to
4-year lows; higher capex the necessary condition for lower investor cash levels.
- Cash overweight close to 2-year high
Over 2/3 investors expect higher short-term rates, highest since Jul’2011; investors
overweight cash close to 2-year high (cash levels dipped from 4.8% to 4.6%);
highest % of investors since Jul’2000 thinks stocks “overvalued”…and yet asset
allocation to equities actually rose in April.
- Rotation from UK/EU to EM
Investors saying Value outperforms Growth stocks at 8-year high; and 12-year high
saying US$ is “undervalued”; Chart 1 shows rotation from longs in UK/Europe to
EM/energy, but tech not reduced much. April's "crowded longs" are US HY & EU
periphery debt. On flip-side, pain trade in commodities is to upside.
- Contrarians would…
…long pharma, short consumer discretionary; long telcos, short banks; long Japan,
short US..

>>> What to look at today : 15/04/2014

Market closed higher but lower their highest levles of teh day after volatile 2 last hours of trading, C helped the sentiment...First hours of trading were driven by short as many areas that displayed weakness in recent sessions, showed relative strength this morning....Volumes were below average @ 680mil shares...VIX @ 16.11 -5.40%...-US earnings season kicks into higher gear on Tuesday with pre-market release from JNJ and KO. Afternoon session will see earnings announcements from CSX, Intel, and Yahoo....Asia is quite ahead ofChinese Q1 GDP to be released tomorrow, a researcher with China's top economic planning agency NDRC said Q1 will likely come in below 7.5% (consensus is 7.4%), and that even a slowdown to 6.5% in 2014 overall would be acceptable without justifying more stimulus. Another researcher said China is faced with a risk of falling short of 7% GDP growth level in 2014, while former PBoC adviser Yu noted the govt would be able to use its FX reserves to boost commercial banks if necessary to prevent an outside chance of a financial crisis...Nikkei +0.67%...Hang Seng -1.22%...Shanghai -1.10%....Still some tensions in Ukraine

Eur$1.3815 S&P Fut +0.08% European Fut. +0.16%

Keep an ey on :
- ALO FP : Alstom Transport to Cut 180 Jobs at Saint-Ouen: Les Echos
- BNP FP : French Banks Concerned Bonus Cap Will Lead to Departures: Echos
- CAP FP : Infosys Gains Most on Sensex After Dollar Sales View Tops Ests. --> +ve for Cap Gemini
- DGE LN : Diageo Offers to Buy up to 26% of United Spirits, could take up to 51% Diageo CFO Mahlan Says No Plan to Take United Spirits Private
- FUM1V FH : Fortum could dispose its electricty distribution network business in parts, list or sell it to investor
- GAM SW : GAM Holding 1Q Investment Management AUM Declines to CHF69.6
- GLEN LN : Glencore's Caracal Purchase Opportunistic Use of Cash, UBS Says
- HEI GY : CRH, HeidelbergCement Best Placed Into 1Q Earnings, Davy Says
- HMB SS : H&M Total Sales Rise 13% in March
- INFO IN : Infosys 4Q Net Income Rises 25%, Beats Analysts’ Estimates
- NESN VX : Nestle 1Q Organic Sales In Line With Ests., Confirms Outlook, Says Slow Growth in China, India in 1Q
- NHY NO : Norsk Hydro ASA Agrees to sell aluminium casthouse in Hannover to IQ Industrial Holding, no terms disclosed
- ORI SS : Oriflame Chairman Says Currencies Pose Challenge, DI Reports
- UG FP : Peugeot CEO Doesn’t See More Plant Closures in France: Echos
- RIO LN : Rio Produces Record Iron-Ore Output as Global Supply Gains, Stock is gaining 1%
- ROG VX : Roche 1Q Rev. Meets; Confirms Outlook, Plans to Raise Div., Says Lung Cancer Drug to Start Ph. 3 This Year
- SAB LN : SABMiller FY Organic Lager Vol. In Line With Ests.
- SUN SW : Sulzer 1Q Orders Rise, Sales Lag; Sees Slightly Lower 2Q Orders
- SAP GYP : Infosys Gains Most on Sensex After Dollar Sales View Tops Ests. --> +ve for SAP
- TLW LN : Rumor Sinochem & Statoil could be interested bu TLW, £15 could have been discussed
- VWS DC : Vestas Aims to Boost Market Share in China, CFO Tells Borsen
- CSS FP : Vivarte Seeks EU2.3b Debt Write-off, EU500m Financing: Figaro

>>> Brokers Upgrades & Downgrades - 15/04/2014

>>> Up
*ACS RAISED TO NEUTRAL VS UNDERPERFROM AT BOFAML
*APR ENERGY RAISED TO BUY VS NEUTRAL AT GOLDMAN
*ATRIA RAISED TO SELL VS STRONG SELL AT NORDEA
*EVONIK RATED NEW NEUTRAL AT BOFAML, PT EU30
*EVRAZ RAISED TO BUY VS SELL AT SOCGEN
*NETCARE RAISED TO BUY VS NEUTRAL AT BOFAML
*SODEXO RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*VEECO INSTRUMENTS RAISED TO BUY VS HOLD AT BERENBERG
*VIENNA INSURANCE RAISED TO NEUTRAL AT CREDIT SUISSE

>>> Downgrades
*ABB CUT TO HOLD VS BUY AT HELVEA/BAADER BANK
*CARACAL ENERGY CUT TO UNDERWEIGHT VS OVERWEIGHT AT BARCLAYS
*G4S CUT TO SELL VS HOLD AT DEUTSCHE BANK
*MEDICLINIC CUT TO NEUTRAL VS BUY AT BOFAML
*ROBERT WALTERS CUT TO NEUTRAL VS BUY AT GOLDMAN
*SKANSKA CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
*VODACOM CUT TO NEUTRAL VS BUY AT UBS

>>> PT Chnages

>>> Initiation
*GAS NATURAL RATED NEW NEUTRAL AT HSBC
*GIVAUDAN RATED NEW OUTPERFORM AT CREDIT SUISSE, PT CHF1,500
*HOCHTIEF REINSTATED BUY AT BOFAML, PT EU75
*OSRAM LICHT RATED NEW BUY AT CITI, PT EU50
*STATOIL ASA RATED NEW MARKET PERFORM AT BMO CAPITAL MARKETS
*TULLOW OIL RATED NEW OUTPERFORM AT BMO CAPITAL MARKETS

>>> Call
>> Sector
*UK RETAIL CUT TO UNDERWEIGHT VS BENCHMARK AT CREDIT SUISSE

>>> Tullow Oil welled up yesterday amid speculation that it coul


Tullow Oil welled up yesterday amid speculation that it could soon be the target of a bidding war.
Sinochem, one of China’s four state oil companies, is said to be looking at the African-focused oil and gas explorer as a way to access the continent’s energy reserves. Meanwhile, Norwegian major Statoil is also said to be considering an approach, as part of its aggressive international expansion plans.

A possible bid price of £15 a share is being discussed, which is an attractive prospect for investors. The company is trading well below its record April 2012 high of £15.34 after a series of disappointing updates.

Tullow was one of yesterday’s best performers, adding 32p to 859p.

>>> Asian Update

Asian Market Update: China lending not showing any signs of a slowdown even as money supply growth eases; RBA meeting minutes remain neutral

***Economic Data*** - (CN) CHINA MAR AGGREGATE FINANCING (CNY): 2.07T V 1.85TE - (CN) CHINA MAR NEW YUAN LOANS (CNY): 1.05T V 1.0TE - (CN) CHINA MAR FOREIGN RESERVES: $3.95T V $3.92TE - (CN) CHINA MAR M2 MONEY SUPPLY Y/Y: 12.1% (multi-year low) V 13.0%E; M1 MONEY SUPPLY Y/Y: 5.4% V 6.5%E - (UK) UK MAR BRC SALES LFL Y/Y: -1.7% V +1.0%E (2nd consecutive decline)

Market Snapshot (as of 03:30 GMT): - Nikkei225 +0.8%, S&P/ASX +0.8%, Kospi +0.1%, Shanghai Composite -0.7%, Hang Seng -0.5%, Jun S&P500 flat at 1,825, Jun gold -0.6% at $1,320, May crude oil -0.7% at $103.28/brl

***Highlights/Observations/Insights*** - Ahead of tomorrow's key release of Q1 GDP, China put out its March figures for lending and money supply - new yuan loans met estimates soundly above CNY1T while M2 growth slowed to a multi-year low. China's quarterly data on FX reserves nudged up by over 0.5% to $3.95T. Also of note ahead of the GDP data, a researcher with China's top economic planning agency NDRC said Q1 will likely come in below 7.5% (consensus is 7.4%), and that even a slowdown to 6.5% in 2014 overall would be acceptable without justifying more stimulus. Another researcher said China is faced with a risk of falling short of 7% GDP growth level in 2014, while former PBoC adviser Yu noted the govt would be able to use its FX reserves to boost commercial banks if necessary to prevent an outside chance of a financial crisis.

- Reserve Bank of Australia maintained its neutral stance in the minutes of the meeting from April 1st. RBA reiterated the most prudent policy course is still likely a period of stability in interest rates, and that rates were appropriately set to maintain inflation within target. In terms of domestic economy, RBA noted consumer demand has strengthened and that forward indicators pointed to modest improvement in employment.

- Rio Tinto put out its quarterly production data. Q1 iron ore output fell 6% sequentially but rose 8% y/y to 66.4M tons. Rio also affirmed its FY14 iron ore production targets of 295M tonnes, but lowered the annual forecast for Australian hard coking coal to 8.2M tonnes from 8.5M prior. Rio Tinto traded up by nearly 1% in afternoon session.

- Russian Pres Putin and US Pres Obama phone conference was tense by all accounts, just as pro-Russia separatists seized more buildings in eastern Ukraine and President Turchynov's threat of "full-scale" anti-terrorist operation turned out to be a bluff. Putin reiterated Kremlin position that the street protests in eastern Ukraine are the result of Kiev govt not taking into account the interests of the Russian-speaking population there, and the White House deemed Russia's meddling as inconsistent with promotion of a diplomatic solution. Meanwhile, ultra-nationalist crowds had reportedly gathered in Kiev, calling for removal of Turchynov and interior minister Avakov, claiming the situation in east Ukraine is slipping from govt control.

- US earnings season kicks into higher gear on Tuesday with pre-market release from JNJ and KO. Afternoon session will see earnings announcements from CSX, Intel, and Yahoo.

***Fixed Income/Commodities/Currencies*** - JGB: (JP) Japan's MoF sells ¥2.46T in 0.2% (0.2% prior) 5-yr notes; Avg yield: 0.189% v 0.204% prior; Bid to cover: 4.67x v 3.81x prior - (CN) PBoC to drain CNY93B in 28-day repos, CNY79B in 14-day repos (17th consecutive drain) - GLD: SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 806.2 tonnes (first rise since Mar 24th) - USD/CNY: (CN) PBoC sets yuan mid point at 6.1571 v 6.1531 prior setting (weakest setting since Sep 17th)

- In USD majors, AUD/USD and NZD/USD are down over 30pips a piece below 0.9390 and 0.8660 respectively, while USD/JPY briefly touched the ¥102 handle - up about 20 pips from the lows. USD remained bid after some moderate strength in the US session where it was driven higher by a multi-month high in the rise of US retail sales.

***Equities*** US markets: - PBY: Reports Q4 -$0.06 (include items) v +$0.10e, R$496M v $531Me (2 ests); -5.9%

Notable movers by sector: - Consumer Discretionary: Modern Media Holdings 72.HK -5.3% (FY13 results) - Materials: Rio Tinto RIO.AU +0.5% (Q1 operating results); OZ Minerals OZL.AU +4.7% (Q1 production results); Inner Mongolia Junzheng Energy & Chemical Industry 601216.CN +3.1% (FY13 results); Perseus Mining PRU.AU -5.5% (shareholder lowers stake) - Industrials: Nissan Motor 7201.JP +0.7% (to increase local parts purchase in China); Xinjiang Urban Construction Group 600545.CN +7.2%, Xinjiang Beixin Road & Bridge Group 002307.CN +5.4%, China West Construction Group 002302.CN +5.1%, Xinjiang International Industry 000159.CN +10.0% (China to support Xinjiang Province development); AVIC Aircraft 000768.CN +2.2%, Jiangxi Hongdu Aviation Industry 600316.CN +2.3% (China Pres Xi comments on air force) - Technology: Fujitsu 6702.JP +1.5%, Panasonic Corp +0.5% (speculation on JV)

>>> US after Hours

After Hours Summary: LEDS -11.7%, PBY -6.4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to news: FFCO +9.7% (co and and CB Financial Services agree to merge), UMPQ +1.5% (to replace SGMS in the S&P MidCap 400), SGMS +1.4% (to replace UMPQ in the S&P SmallCap 600), ARCW +0.9% (announced 1.5 to 1 stock dividend)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: LEDS -11.7%, PBY -6.4%

Companies trading lower in after hours in reaction to news: AXLL -1.9% (provided update on repairs at Lake Charles, Louisiana, chemicals facility: expected to reach full operating rates in May; co sees Q1 adjusted EBITDA of $65-70 mln), NGHC -0.6% (filed for 12.82 mln share common stock offering by selling shareholders)

>>> US Close Dow+0,91% S&P+0,82% Nasdaq+0,57%

Closing Market Summary: Stocks Climb But Momentum Names Remain Volatile

The major averages finished the Monday session on a modestly higher note, but they ended below their best levels of the day after volatility during the last two hours of action forced the indices to test their flat lines. The S&P 500 rose 0.8%, while the Nasdaq added 0.6% after being up as much as 1.3%.

The stock market began the session on an upbeat note, casting aside renewed concerns about the situation in Ukraine, where the country's army was called in over the weekend to deal with pro-Russian separatists in several cities in the Southeast.

Instead, the market rallied in the morning after Citigroup's (C 47.67, +1.99) above-consensus quarterly results, combined with a better-than-expected March Retail Sales report, invited buyers into the mix. In all likelihood, the early advance was assisted by some short-covering as many areas that displayed weakness in recent sessions, showed relative strength this morning.

Biotechnology was among the early leaders and the iShares Nasdaq Biotechnology ETF (IBB 215.37, -0.08) made a run at its 200-day moving average. The ETF made a brief appearance above that noteworthy level before spending the afternoon in a steady retreat that placed the group back in the red. The health care sector, meanwhile, added 0.5%.

Other momentum names traded in similar fashion to biotech with the likes of Google (GOOG 532.52, +1.92), Facebook (FB 58.89, +0.36), LinkedIn (LNKD 165.78, 0.00), and Yelp (YELP 61.94, +0.22) showing early strength before retreating from their highs during afternoon action. The technology sector (+1.1%), meanwhile, held up relatively well, but it too ended below its session high.

Elsewhere among cyclical groups, energy (+1.3%) outperformed throughout the session with support from Dow components Chevron (CVX 118.70, +1.67) and ExxonMobil (XOM 97.86, +1.14), both of which posted gains close to 1.3% apiece. The sector ended in the lead while crude oil rose 0.4% to $104.05/bbl.

The other commodity-related sector, materials, ended in line with the broader market. Miners and steelmakers displayed strength, with Market Vectors Gold Miners ETF (GDX 24.52, +0.30) and Market Vectors Steel ETF (SLX 47.41, +0.56) both gaining 1.2%. For its part, gold futures advanced 0.7% to $1327.70/ozt.

Treasuries posted slim losses, sending the benchmark 10-yr yield higher by one basis point to 2.64%.

Participation was below average as less than 680 million shares changed hands at the New York Stock Exchange.

Reviewing today's data: Retail sales increased 1.1% in March after increasing an upwardly revised 0.7% (from 0.3%) in February. The consensus expected retail sales to increase 1.0%. As expected from the motor vehicle sales data, auto sales contributed significantly to overall sales growth. Sales at motor vehicle and parts dealers increased 3.1% in March after increasing 2.5% in February. Excluding autos, retail sales still increased a solid 0.7% in March, up from a 0.3% gain in February. The consensus expected these sales to increase 0.5%. Sales were strong all around, but there wasn't much to suggest that the acceleration in spending was the result of pent-up demand from delayed winter spending. The March employment report showed a 0.7% increase in aggregate wages, which exactly matched spending after stripping out autos.  Business inventories increased 0.4% for a second consecutive month in February. The consensus expected inventories to increase 0.6%. Total inventories consist of manufacturers, merchant wholesalers, and retailers. Both manufacturers (0.7%) and wholesalers (0.5%) inventories were announced prior to the release. Only retailer inventories, which were flat in February after increasing 0.3% in January, were unknown.  Tomorrow, March CPI (consensus 0.1%) and the Empire Manufacturing Survey (consensus 7.5) for April will be released at 8:30 ET, while the February Net Long-Term TIC Flows report will cross the wires at 9:00 ET. The day's data will be topped off with the NAHB Housing Market Index (consensus 50) for April, which will be released at 10:00 ET.

S&P 500 -1.0% YTD  Dow Jones Industrial Average -2.4% YTD  Nasdaq Composite -3.7% YTD  Russell 2000 -4.0% YTD