TheChek News Flow

- Media was exceptionally strong in 2013 (+20% vs market), driven by Europe. It should outperform again in 2014 returning to its 2008–12 drivers: gradual re-rating and above-average earnings growth driven by high margins, low capital intensity and proven ability to reshuffle asset mix.. - Three key themes to drive stock performance in 2014 : Firstly, increased selectivity in playing the European/US recovery. Secondly, greater multiples differentiation reflecting diverging long-term growth prospects. Lastly, the re-emergence of some out-of-fashion or less cyclical names. - We reduce exposure to broadcasters, favouring only higher-quality northern European names, ITV and ProSieben (upgraded). We downgrade RTL and TF1 to Neutral, now fairly valued. Our work shows that market hopes of a rapid ad recovery could prove void in France and Italy – M6 and Mediaset are downgraded to Underperform. - Top picks : Long: Publicis, Wolters Kluwer, ITV, Rightmove and JC Decaux. Avoid: Lagardère, Mediaset.

REco : *LAGARDERE CUT TO UNDERPERFORM VS NEUTRAL AT EXANE *M6 CUT TO UNDERPERFORM VS NEUTRAL AT EXANE *MEDIASET CUT TO UNDERPERFORM VS NEUTRAL AT EXANE *PROSIEBENSAT.1 RAISED TO OUTPERFORM VS NEUTRAL AT EXANE *REED ELSEVIER CUT TO NEUTRAL VS OUTPERFORM AT EXANE *RTL GROUP CUT TO NEUTRAL VS OUTPERFORM AT EXANE *UBM CUT TO NEUTRAL VS OUTPERFORM AT EXANE *WOLTERS KLUWER RAISED TO OUTPERFORM VS NEUTRAL AT EXANE

New York hedge-fund manager Alphonse “Buddy” Fletcher is looking more and more like Bernie Madoff. Fletcher’s master hedge fund, Fletcher International, which filed for bankruptcy protection in June 2012, was a fraud with “many of the characteristics of a Ponzi scheme,” according to a bombshell report.

After a year-long investigation, trustee Richard J. Davis concluded this week in a nearly 300-page report that there were virtually no assets left to pay Fletcher’s creditors. By the date of its bankruptcy, Fletcher “held only one asset of undisputed value — Helix stock — worth less than $8 million,” Davis said in the report filed in federal bankruptcy court. Fletcher had valued the fund at $352 million. The alleged fraud was defined by “the extensive use of wildly inflated valuations, the existence of fictitious assets under management numbers, the improper payment of excessive fees” and “misuse of investor money.”

The Department of Justice and the Securities and Exchange Commission are also investigating Fletcher’s hedge fund, and earlier this year subpoenaed documents from the trustee. Davis said the “ultimate victims of this fraud” were four public employee pension funds that invested a combined $125 million since mid-2007. Some $8 million of the pension fund money was siphoned off to finance a movie being made by Fletcher’s brother Geoffrey. Another $1 million went to pay for legal expenses from Fletcher’s ongoing racial discrimination suit against Manhattan’s famed Dakota apartment building. The alleged fraud was, the report says, aided by hedge-fund administrator Citgo, which lent the Fletcher fund money to buy a fund Citgo wanted to dump, then introduced one of the pension funds to Fletcher; that money helped pay Citgo back. Fletcher, 48, could not be reached for comment.

Former SAC Capital Advisors tech analyst Jon Horvath testified he was afraid he would lose his job if he didn’t come up with illicit stock tips for his boss, Michael Steinberg. “I thought my job was in danger. I thought he would fire me,” Horvath, the government’s star witness in the insider-trading case against Steinberg, told a Manhattan federal jury. Horvath, testifying Wednesday on the fifth day of the trial, said he received an ultimatum from the top SAC money manager after Horvath’s tech recommendations for Steinberg lost money in 2007. “What I need you to do is to go out and get me edgy, proprietary information that we can use to make money in their stocks,” Horvath testified that Steinberg told him after a bad losing streak. Horvath said he thought Steinberg wanted him to cultivate sources of “material non-public information.” He said he soon began giving Steinberg insider tips on Dell that he received from Jesse Tortora, an analyst at another hedge fund and a member of what prosecutors call a “corrupt circle” of friends who shared illegal information. Both Tortora and Horvath pleaded guilty and have been cooperating with the prosecution in the case against Steinberg. In addition to Dell’s earnings before they were released publicly, Tortora also accurately predicted a restructuring that would save Dell billions of dollars and said the CFO would soon leave. Horvath said he emailed the details of Tortora’s tips to Steinberg, and uploaded them onto a SAC corporate server, called “Tamale,” an archival system for trade and data.

Up

*BNP RAISED TO BUY VS NEUTRAL AT UBS *BSKYB RAISED TO OUTPERFORM VS NEUTRAL AT MACQUARIE *EUROMONEY RAISED TO BUY VS NEUTRAL AT UBS *GALENICA CUT TO NEUTRAL VS BUY AT UBS *INTER RAO RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN *PUBLIC POWER CORP RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN *RENTOKIL RAISED TO BUY VS NEUTRAL AT BOFAML *SERCO RAISED TO BUY VS NEUTRAL AT BOFAML *SOCIETE GENERALE RAISED TO NEUTRAL VS SELL AT UBS *TAISEI RAISED TO NEUTRAL VS SELL AT AT CITI *TALKTALK RAISED TO OUTPERFORM VS NEUTRAL AT MACQUARIE

Down

*ATLAS COPCO CUT TO UNDERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY *ENKA INSAAT CUT TO NEUTRAL VS BUY AT UBS *EXPERIAN CUT TO SELL VS NEUTRAL AT GOLDMAN *UPM CUT TO SELL VS NEUTRAL AT UBS *VIG CUT TO REDUCE VS NEUTRAL AT NOMURA *ZOOPLUS CUT TO HOLD VS BUY AT DEUTSCHE BANK

PT Change

* CREDIT AGRICOLE PT INCREASED FROM 10.50 to 10.80 at UBS

Initiation

*ANTOFAGASTA RATED NEW OUTPERFORM AT BERNSTEIN, PT 1,100P

Country Sector Stock Call

*CREDIT AGRICOLE ADDED TO UBS’S KEY CALL LIST (full not attached) ***** *SOCGEN REMOVED FROM UBS’S LEAST PREFERRED LIST *NETHERLANDS CUT TO AA+ FROM AAA; OUTLOOK STABLE, S&P SAYS *S&P RAISES CYPRUS RATINGS TO ’B-/B’; OUTLOOK STABLE *S&P: SPAIN (KINGDOM OF) TO BBB-/STABLE FROM BBB-/NEGATIVEt

US MArket were closed for Thanksgiving yesterday, half day today ( closing at 1pm E.T)...Asia weaker on very thin volume...weaker on thin volumes... Japan's key inflation figure increased at the fastest pace in five years and reinforcing the positive effects from Abenomics...JPY Declined...Japan Fin Min Aso: Japan economy not out of deflation yet...Kuroda said, Easing putting strong downward pressure on yields; Prepared to further ease policy if risks to economy threaten 2% inflation target...Nikkei -0.41%...Shamghai -0.05%...Spain Outlook, Cyprus Rating Raised by S&P; Netherlands Cut...Schaeuble: rules out tax hikes or cuts; coalition pact with SPD is a fair compromise...Frecnh better unemployement data...

Eur$ 1.3610 S&P Fut +0.20% European Fut. -0.10%

Keep an eye on :

- STS IM : Ansaldo Energia, the Italian manufacturer of power station turbines, will seek industrial partners to guide it to a listing starting 2014 - O2C GY : Cat Oil 3Q Net Almost Doubles; Raises 2013 Rev., Ebitda Targets - EDF FP : EDF Competes With GDF Suez to Win French Offshore Wind Projects - STR AV : Strabag 3Q Net Income Stagnates; FY Forecast Confirmed - SUR GY : Surteco 9M Sales, Net Fall 5%; Confirms 2013 Outlook - VED LN : Vedanta’s Agarwal Says He Regrets $8 Billion Aluminum Investment - VIE FP : Veolia Environnement Completes Purchase of 50% Proactiva Stake

EMEA IPOs Update

* CTT EUR580m IPO Books covered / Investors guided towards high end of the range (4.10-5.52) Retail tranche 6.5x covered Books to close next Monday, company will be on the road in Madrid JPM, Caixa GloCos

* Energa, up to $900m IPO (Z2.8bn) Books covered / Investors guided towards midpoint of the range; ie. 16-18 vs. initial range @ 15-20 Management in Varsaw today, in Paris on Monday Books to close next Tuesday JPM UBS GloCos

* Self-help story with material re-rating potential CASA is one of the most compelling self-help stories in the European banking sector, in our view. At 6.5x 2015E P/E, CASA trades at a 30% earnings discount to European peers, despite 70% of net income being driven by the low-volatility, highly profitable French retail and Savings businesses. Depressed valuation reflects continued market concerns about low capital and high leverage at the listed-entity level, in our view. We think these concerns are overplayed. Though CASA has a low starting point on Basel 3 Capital – 6.9%, we think the combination of strong retained earnings (+170bps), derisking in the CIB (+80bps) and the already-announced 'SWITCH' mechanism (+80bps), will drive Core tier I above 10% by FY 2015E. We expect strong capital generation to drive +8% TNAV CAGR - leaving the stock at 0.8x TNAV 2015E for a 13% RoTE: we think the re-rating potential from this capital catch-up is material

*Market appears to be discounting worst-case scenario Some regulatory tail-risks exist, but we currently think the market discounts a worstcase scenario – an outcome we view as unlikely. We expect the ECB's Asset Quality and balance-sheet review to be conducted at the level of the Credit Agricole Group (not listed entity) – leaving CASA management in a strong position to deliver a shareholderfriendly deleveraging agenda in 2014E.

* Upside risk from CIB de-risking We see some upside risks to company targets in coming years – particularly if management pursue a more meaningful CIB de-risking agenda. As it stands, we forecast CASA CIB to consume ~40% of Basel 3 capital in 2014, while contributing ~25% of group earnings at a 7% divisional RoE. We would therefore expect the division to be high on management's list of priorities at the forthcoming Strategic Review in March 2014.

*Valuation: We have a Buy rating and increase our Price Target to €10.80 (from €10.50), driven by a probability-weighted Gordon Growth Model.

Asian Market Update: Asian markets trade weaker; Japan core inflation hit five-year highs

***Observations/Insights*** - With the US markets closed for Holiday Asian bourses were mostly trading weaker on thin volumes. Japan's key inflation figure increased at the fastest pace in five years and reinforcing the positive effects from Abenomics. The yen declined to a five-year low versus the euro after Japanese inflation data. The core inflation data rose 0.9% marking the fifth consecutive gain in the index highest ever recorded since November 2008.

- The Australian benchmark S&P/ASX 200 was trading in negative territory with GrainCorp trading by lower than 25% following earlier news that the Australian Treasurer Hockey blocked American food giant Archer Daniels Midland takeover bid. - Australia private sector credit for the month October increased at the same pace as it did in September, with the annual rate increasing the most since January reflecting the impact of higher home prices last year, but much slower than late 2008.

***Economic Data*** - (AU) AUSTRALIA OCT PRIVATE SECTOR CREDIT M/M: 0.3% V 0.4%E; Y/Y: 3.5% V 3.5%E >- (JP) JAPAN OCT PRELIM INDUSTRIAL PRODUCTION M/M: 0.5% V 2.0%E (2nd straight rise); Y/Y: 4.7% V 6.3%E - (JP) JAPAN NOV MARKIT/JMMA MANUFACTURING PMI: 55.1 V 54.2 PRIOR (highest reading in over 7 years) - (JP) JAPAN OCT NATIONAL CPI Y/Y: 1.1% V 1.1%E; NATIONAL CPI EX-FRESH FOOD Y/Y: 0.9% V 0.9%E (5-YEAR HIGH) - (JP) JAPAN NOV TOKYO CPI Y/Y: 0.9% V 0.7%E; TOKYO CPI EX-FRESH FOOD Y/Y: 0.6% V 0.4%E - JP) JAPAN OCT JOB-TO-APPLICANT RATIO: 0.98 V 0.96E (highest reading since Dec 2007); JOBLESS RATE: 4.0% V 3.9%E - (KR) SOUTH KOREA OCT INDUSTRIAL PRODUCTION M/M: +1.8% V 0.8%E; Y/Y: 3.0% V 0.9%E - (NZ) NEW ZEALAND OCT BUILDING PERMITS M/M: -0.6% V +1.7%E - (NZ) NEW ZEALAND OCT MONEY SUPPLY M3 Y/Y: 6.6% V 7.3% PRIOR - (JP) JAPAN OCT VEHICLE PRODUCTION Y/Y: 10.1% V 13.0% PRIOR - (KR) SOUTH KOREA OCT CYCLICAL LEADING INDEX CHANGE Y/Y: +0.4% V -0.2% PRIOR - (SG) SINGAPORE OCT BANK LOANS AND ADVANCES: 15.6% V 15.7% PRIOR - (SG) SINGAPORE OCT CREDIT CARD BAD DEBTS (SGD): 20.6M V 19.8M PRIOR; CREDIT CARD BILLINGS: 3.6B V 3.4B PRIOR - (UK) UK NOV GFK CONSUMER CONFIDENCE: -12 V -10E

***Fixed Income/Commodities/Currencies*** - (AU) Australia MoF (AOFM) sells A$800M in 2019 Bonds; avg yield: 3.5060%; bid-to-cover: 4.15x - (TW) Taiwan govt sells NT$35B in 10-yr bonds, bid-to-cover 1.86x, Avg yield 1.673% v 1.799% prior

***Speakers/Political/In the Papers*** - (JP) Japan Chief Cabinet Sec Suga: Not aware at time China planes through air defense zone - (JP) Japan Fin Min Aso: Japan economy not out of deflation yet - (JP) Japan BOJ Gov Kuroda: Easing putting strong downward pressure on yields; Prepared to further ease policy if risks to economy threaten 2% inflation target - addressing parliament - (JP) Japan, US to increase surveillance operations in the East China Sea - Japanese press - (JP) Japan Econ Min Amari: Will meet US Trade Rep (USTR) head about TPP on Dec 1st - (JP) Japan said to be planning the FY13 supplementary budget of ¥7T - Japanese press

- (CN) China City of Taiyuan, Xi'an tighten property curbs - Chinese press - (CN) China National Development and Reform Commission (NDRC) researcher Wang: China may maintain economy growth at 7.5% in 2014 - Chinese press

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -0.9%, S&P/ASX -0.3%, Kospi -0.2%, Shanghai Composite flat, Hang Seng +0.3%, Dec S&P500 +0.2% at 1,807, Feb gold +0.3% at $1,242, Jan crude oil flat at $92.27/brl

Notable movers by sector: - Consumer discretionary: Panasonic Corporation 6752.JP -2.5% (to end circuit board business); Get Nice Holdings Ltd 64.HK +2.8% (H1 results) - Industrials: China International Marine Containers Group Co Ltd 000039.CN +1.8%; Honda Motor Co Ltd 7267.JP -0.6% (to invest in Brazil); Zhong Wang Group 1333.HK -3.1% (plans shares offering); GrainCorp GNC.AU -21.9% (Australia rejects ADM's acquisition plan); Jiangxi Hongdu Aviation 600316.CN +10.0%, Xi'an Aero-Engine 600893.CN +7.5%, Sichuan Chengfa Aero-Science 600391.CN +5.3%, China Spacesat 600118.CN +5.3% (China defense companies gain on air zone tensions) - Materials: Rio Tinto Ltd RIO.AU +2.6% (production plans) - Technology: Fujitsu Ltd 6702.JP +1.5% (liquidate subsidiary); NetDragon Websoft Inc 777.HK -7.3% (Q3 results) - Healthcare: Jointown Pharmaceutical Group Co Ltd 600998.CN +2.2% (to set up private bank); Ain Pharmaciez Inc 9627.JP +2.7% (H1 results) - Source TradeTheNews.com

European Banks Could Take Their Hits Early

Banks Face Up to Next Year's Asset Review by ECB

European banks could be in for a painful end to 2013.

European banks are already facing up to a huge potential capital shortfall next year, thanks to several regulatory pressures. The European Central Bank will carry out an asset quality review aimed at ensuring banks' balance sheets conform to uniform rules in areas like bad loans; stress tests will examine how robust banks might be in a downturn.

That's not the banks' only problem. They also need to comply with minimum capital requirements under Basel III regulations; and ensure they meet leverage ratio rules designed to make them less reliant on borrowed funds. In sum, European banks could need to plug a €280 billion ($380.21 billion) capital gap, according to a report by PwC. Technical adjustments could reduce the gap by around €100 billion. But banks could still have to raise €180 billion from new capital raising or restructuring, PwC reckons.

Rather than wait for the ECB, banks could try to get ahead. Already this year European banks have issued €60 billion of new equity, according to Thomson Reuters data, up from €30 billion in the whole of 2012. Banks like Barclays BARC.LN +1.18% and Deutsche Bank DBK.XE +1.34% have undergone sizable rights issues.

But the process is far from complete. One implication is that banks could use upcoming fourth-quarter results to clear the decks, so that their balance sheets anticipate as far as possible the rules they expect the ECB to apply in its asset quality review. The European Banking Authority last month issued standards for defining nonperforming loans, aimed at stemming divergent practices across the euro zone. Banks could apply them as soon as the current quarter, according to senior executive at a major European bank—with the aim of getting their balance sheets in shape before the ECB's inspectors come to town.

That could make the coming earnings season something of a bloodbath. Already, reserves against bad loans look short in some countries. Italian banks' reserves covered only 41% of their bad loans at the end of September, according to Morgan Stanley. MS +0.06% If they were to raise that ratio to 65%, say, Italian banks would need an extra €11.3 billion of capital to meet a minimum core tier one equity ratio of 8%.

Banks in other countries have made progress earlier. Spain's central bank this year forced its banks to clean up their mortgage lending books. That's one reason why Spanish banks on average trade at close to their tangible book value, compared with Italian banks that trade at around 0.6 times tangible book, according to Berenberg Bank: Investors simply trust Spanish banks' accounts more right now.

Bridging the credibility gap is becoming a matter of urgency for Europe's banks.