TheChek News Flow

Asian Market Update: PBoC back on the sidelines, sending 1-week Shibor higher; China resumes IPOs with 5 approvals

***Observations/Insights*** - PBoC pledges to continue "prudent" monetary policy with "appropriate" liquidity levels, but returns to the sidelines in terms of open market operations after injecting liquidity for the first time in December last week. 1-w Shibor rates rise for the first time in 6 sessions. - Magnitude 5.4 earthquake shakes buildings in Tokyo, but no tsunami warning was triggered. - China Vanke denies press speculation it has over CNY4B in unpaid land appreciation tax. - Australia's S&P/ASX closes the year up 15%, Hong Kong up just over 2%, Nikkei225 and Kospi closed for trading today (up 57% and 0.7% respectively for 2013).

***Economic Data*** - (AU) AUSTRALIA NOV PRIVATE SECTOR CREDIT M/M: 0.3% V 0.4%E; Y/Y: 3.8% V 3.9%E - (KR) SOUTH KOREA DEC CPI M/M: 0.1% V 0.2%E; Y/Y: 1.1% V 1.0%E; CPI CORE Y/Y: 1.9% V 2.0% PRIOR - (SG) SINGAPORE NOV MONEY SUPPLY M1 Y/Y: 11.9% V 13.4% PRIOR; M2 Y/Y: 5.2% V 7.1% PRIOR - (SG) SINGAPORE NOV CREDIT CARD BAD DEBTS (SGD): 21.6M V 20.6M PRIOR; CREDIT CARD BILLINGS: 3.6B V 3.6B PRIOR

***Fixed Income/Commodities/Currencies*** - (CN) PBoC won't conduct open market operations (OMO) in today's session - (CN) Daily Shibor fixings: O/N: 3.1480% v 3.2050% prior (6th consecutive decline); 1-week: 5.2500% v 4.8410% prior (1st rise in 6 consecutive sessions) - GLD: SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 798.2 tonnes (lowest since Jan 2009) - (CN) PBoC sets yuan mid point at 6.0969 v 6.1024 prior setting (record high setting for Yuan) - AUD/USD: According to a survey by Citi and East & Partners, most importers and exporters in Australia prefer AUD/USD to remain in $0.90-1.00 range - SMH

- In FX, traders are unwinding some of the more crowded short yen and short AUD trades in the final Asian session of 2013. After four consecutive gaining sessions, USD/JPY is down marginally for the 2nd consecutive day, falling about 30 pips below ¥104.90. AUD/USD is also up about 30pips from the lows, trading above $0.8930. Note that the latest CFTC positioning saw net AUD shorts at highest levels since early September, while net Yen shorts are at the highest levels since 2007. EUR/USD and GBP/USD were confined to 20pip ranges around $1.38 and $1.6480. NZD/USD was marginally higher above $0.8220, while offshore KRW continued to strengthen against the greenback, with USD/KRW falling back below KRW1,050. USD was also weaker against SGD, as USD/SGD fell 30pips below SG$1.2650.

***Speakers/Political/In the Papers*** - (CN) PBoC: reiterates to pursue prudent monetary policy; to keep appropriate liquidity level - Statement on Monetary Policy Meeting - (CN) China 2014 CPI target may be set at 4.0% v 3.5% in 2013 - Chinese press - (CN) China Academy of Sciences (CAS): 26% of PMI 2.5 particles in Beijing comes from industrial pollution; 20% from secondary inorganic aerosols; 18% from coal; Only 4% comes from waste incineration and vehicle emission - Chinese press - (CN) Nomura analyst: Local govt debt volumes still pose a risk in China - financial press - (CN) China raises individual investors assets threshold for OTC trading to CNY5M v CNY3M currently - financial press - (CN) China Securities Regulatory Commission (CSRC) resumes IPOs with approval of 5 companies - press - (JP) Magnitude 5.4 earthquake reported in Japan's Ibaraki prefecture; Buildings in Tokyo said to have shaken - financial press - (JP) Japan nuclear regulators: domestic nuclear facilities have been unaffected by earthquake - (KR) South Korea Fin Min Hyun: South Korea at crossroads between recession and advanced economy - (KR) Bank of Korea (BOK) Gov Kim: South Korea has low chance of deflation - (KR) South Korea ruling party and opposition lawmakers agree to keep top corporate tax rate at 22%; Raises bottom end from 16% to 17% - Korean press

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 closes, S&P/ASX -0.1%, Kospi closes, Shanghai Composite +0.9%, Hang Seng +0.3%, Mar S&P500 flat at 1,834, Feb gold -0.5% at $1,197, Feb crude oil flat at $99.27/brl

US markets: - MRVL: KKR raises stake to 6.8% from 4.5% - filing; +6.0% afterhours - HTZ: Adopts One-Year Shareholder Rights Plan with a 10% trigger; "Company has had dialogue with a number of shareholders"; +2.3% afterhours - PTC: Acquires ThingWorx for $112M plus an additional $18M earn out; Guides Q1 Rev to high end of $310-320M v $316Me; affirms FY14 $2.00-2.10 v $2.04e from 11/6; +1.3% afterhours - NFLX: Terminates stockholder rights plan effective immediately; Spokesperson: Confirms company is testing $6.99/month (SD only) plans for some new users; testing a pricing model based on the use of multiple screens - financial press; -0.4% afterhours

Notable movers by sector: - Consumer staples: China Starch Holdings 3838.HK -7.2% (issues profit warning) - Industrials: Shanghai Zhenhua Heavy Industries 600320.CN +1.2% (awarded contract); Henan Pinggao Electric 600312.CN +2.6% (awarded contract); BBMG Corp 2009.HK +7.4%, 601992.CN +2.9% (provides FY13 guidance); Gome Electrical Appliances Holdings 493.HK +4.4% (awarded order) - Financials: Biostime International Holdings 1112.HK +1.3% (announces acquisition); China Fortune Land Development 600340.CN +1.9%, Cinda Asset Management 1359.HK +2.3% (enters strategic alliance); Tianjin Jinbin Development 000897.CN +3.0%, Tianjin Port Development 600717.CN +2.5% (Premier Li comments on Tianjin) - Materials: Inner Mongolian Baotou Steel Union 600010.CN +10.0% (announces private placement); Forge Group FGE.AU +9.8% (continues to rise on contract award) - Healthcare: Yunnan Baiyao Group 000538.CN +2.1% (plans acquisition) - Energy: AusTex Oil Ltd AOK.AU +3.7% (shareholder raises stake) - Technology: NavInfo 002405.CN +1.2% (corp tax rate adjustment); Wonders Information 300168.CN +1.6% (awarded contract)

Schumacher accident caps bad year for F1

For Formula One, Michael Schumacher’s skiing accident is one of the worst and most traumatic moments in a miserable year for motorsport’s pre-eminent series. His injury casts another grim shadow over a season that witnessed the death of Maria de Villota, who was the best prospect of becoming F1’s first female driver for 40 years but who died in a hotel room in October. The cause of her death was believed to be associated with injuries she sustained last year when she lost her right eye after crashing during testing in Cambridgeshire. Mr Schumacher and de Villota are reminders that for all the technological wizardry behind the vehicles, the sport thrives on personalities – of which it has very few. During his period of dominance from the mid-1990s, which brought him seven world titles and 91 Grand Prix triumphs, even Mr Schumacher was hardly considered a charismatic individual. His decade of glory was a personal achievement never seen before in F1 but it sucked dry the competitive juices on which the series depends. But there was a messianic quality to his comeback from retirement in 2010, injecting much-needed energy to F1 at a time when personalities and competition were in short supply. This time, it is another German, Sebastian Vettel, who is dominating F1 as surely as Mr Schumacher ruled over the sport. His triumph in this year’s world drivers’ championship was his fourth in succession. Fearing declining television audiences, F1 supremo Bernie Ecclestone is casting around for ideas to make races more competitive. It is the same dilemma F1 grappled with during Mr Schumacher’s unchallenged reign. Yet measures to spice up the sport this season reduced F1 to a laughing stock. Tyres were designed to ensure they had to be changed every 20 laps, but they tended to blow out. An adjustable rear wing, meant to improve the ability to overtake, ended up making overtaking far too easy. Meanwhile, F1 descended into familiar political infighting and worries about the costs of running teams resurfaced. As for Mr Ecclestone, he has spent as much time with lawyers as drivers, fighting numerous legal challenges that threaten his hold on F1, including an indictment served in Germany on allegations of bribery. For the time being, F1’s warring parties are united in their response to Mr Schumacher’s life-threatening injury. Bitter though the divisions are, the sport comes together to honour those who have lived up to the challenge of confronting the dangers and risks of careering round racing tracks at top speed. It is a challenge that has instant global appeal, one that is recognised on the big screen, as recent films on the life and death of Ayrton Senna and the rivalry between James Hunt and Niki Lauda demonstrate. Michael Schumacher is perhaps F1’s most recognisable name. His global fame is a mark of how far and wide F1 can reach. Even in retirement, he is a personality the sport can ill afford to lose.

Fears after key China debt level soars 70%

Local government debt levels in China have soared to almost $3tn in less than three years, according to an official audit highlighting one of Beijing’s most daunting challenges as it attempts to sustain economic growth while avoiding a financial crisis. In a long-awaited report, China’s National Audit Office said local government debts had increased almost 70 per cent to reach Rmb17.9tn ($2.95tn) by the end of June. The NAO, whose last survey put the burden at Rmb10.7tn at the end of 2010, added that government debt levels were generally "under control" but identified "potential risks in some places". Monday’s audit, which included contingent liabilities and debt guarantees, was ordered by the State Council in June. Xiang Huaicheng, former finance minister, had previously estimated that local government debts could exceed Rmb20tn. Chinese officials and analysts have long worried about the amount of debt racked up by local governments, which are not allowed to tap banks directly but establish special purpose vehicles to borrow money for investment projects. Such borrowing, often secured against local land values, helped China achieve impressive rates of growth even in the immediate aftermath of the global financial crisis There are increasing fears, however, of a hard landing for the economy as Beijing enforces fiscal discipline on local government borrowers. China’s short-term funding costs approached 9 per cent earlier this month, before moderating towards the end of last week. Speaking at the weekend, Chinese premier Li Keqiang said his government would guarantee "appropriate liquidity" and "reasonable growth in credit" next year. In a recent report to China’s parliament, the State Council predicted a final GDP growth figure of 7.6 per cent for 2013, compared to 7.7 per cent last year and a post-crisis high of 10.4 per cent in 2010. The NAO’s latest estimate for local government debt is equivalent to a little more than 30 per cent of gross domestic product, compared to 25 per cent of GDP at the end of 2010. "The pace of [local government] debt accumulation in recent years has been too fast and is not sustainable," said Wang Tao, economist at UBS. According to Ting Lu, economist at Bank of America Merrill Lynch, China’s total public debt now stands at 53.3 per cent, with corporate debt estimated at 111 per cent. "The markets and the Chinese government should be alarmed by the rapidly rising leverage," Mr Lu said in a note. "But we do not believe China is on the brink of a debt crisis, especially if the new leaders can take decisive measures to arrest rising leverage." "The number is pretty much in line with expectations," added Arthur Kroeber at GK Dragonomics. "The starting point in terms of managing it is stopping a new flow of local government debt." Bo Zhuang, economist at consultancy Trusted Sources, said that unlike its earlier audit, Monday’s NAO report had included a survey of village governments. He added that central government officials were particularly worried about the value of land pledged as loan collateral in China’s smaller cities. Zhang Ke, a senior Chinese auditor, warned in April that local government borrowing was "out of control" and could spark a massive financial crisis.

After Hours Summary: HTZ +3.4% after adopting one-year shareholder rights plan

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: none

Companies trading higher in after hours in reaction to news: HTZ +3.4% (adopts one-year shareholder rights plan), MRVL +3.4% (KKR discloses 6.8% active stake in 13D filing), SFE +2.6% (partner company ThingWorx confirms acquisition by PTC for $112 mln; SFE expects to realize a minimum of $40.5 million in aggregate cash proceed).

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: none.

Companies trading lower in after hours in reaction to news: none.

The simple strategy of identifying the major trend and then holding on through the bumps paid off handsomely in 2013. With just one day of trading left, the broad market is sitting on a total return north of 30%. But all good things do eventually come to an end. By the look of the trend it is hard to think that end is immediately upon us. Later in 2014, however, may be a different story. Indeed, even several technical issues – lagging small stocks and deteriorating market breadth, for instance – have been resolved. The Russell 2000 index of small company stocks may not be leading the market, but it is at least keeping up with it again. And the NYSE advance-decline indicator, which keeps tabs on the number of stocks going up and down each day, has moved to fresh 52-week highs. For me, the big problem is sentiment. I've written here about very high levels of bullishness among investors and traders and very low levels of bearishness. What constitutes too much bullishness and too little bearishness is up for debate, but at some point the giddiness will reach the critical level where theoretically everyone interested in buying stocks has already done so. Without fresh demand, it will be difficult for prices to advance any farther. Extremely bullish sentiment also leaves the market vulnerable to a shock that could cause people to try to sell into this vacuum of demand, leading to a steep and swift decline. Last week, bearish sentiment according to the Investors Intelligence survey of financial advisors dipped to 14.1%. This is the lowest level in more than two decades in terms of the dearth of bears and in the ratio of bears to bulls. This does not mean the market is about to tank but it should keep us alert for the first true sign of trouble. The long-awaited market correction can easily catch everyone napping under such extremes of sentiment. Let's move to the big picture to see where the market is now and what that might mean going forward. The Dow Jones Industrial Average broke out from seven-month trading range in mid-November and based on the size of the range the implied upside target is roughly 16,750 (see Chart 1), up from around 16,490 Monday. This is simply the height of the range projected up from the breakout point. In early December, prices backed down to once again touch the top of the former trading range in what technicians call a "test" of the breakout. If demand for stocks swells, which it did, the breakout holds and prices move back up. The odds that the upside target will be achieved increase. The target is also in line with the top of the rising trend channel that has defined the market since the major low in October 2011. A rising trend channel is just a trendline drawn through significant lows and a parallel line drawn through significant highs. For the Standard & Poor's 500, pundits have seen many bearish patterns on long-term charts from triple tops to expanding triangles (see Chart 2). None seem valid given the size of the current bull market from the 2009 low because it has stretched those patterns beyond what seems reasonable. In other words, the current rally invalidated them and that is good news for long-term bulls. But it would also be premature to call the action in 2013 a breakout from a 20-year trading range. One of the events I have noticed over my career is that breakouts that occur after strong moves are prone to failure. These momentum-based breakouts, where trends are already in effect before resistance is broken to the upside, are often just temporary overshoots of that resistance. What can cause such a self-propagating trend? Extreme bullish sentiment. Nobody wants to be left behind, and so investors buy at any price, even if indicators flash warnings. Sooner or later, however, the market will correct. As the Dow did with its shorter-term pattern, the S&P 500 can suffer a sharp decline, perhaps down to 1,550, in round numbers, to test its breakout above its 2000 and 2007 highs. If that happens, we'll have to see if demand swells again and prices hold that level. If so, it could be the great buying opportunity for which many savvy investors are waiting. It would also be the confirmation of the start of a secular bull market that can last for several years. The problem is that this scenario calls for a good deal of pain beforehand. To sum up, the Dow has some unfinished upside business in the short-term and that is good for stocks in general as 2014 begins. However, in an environment of extreme bullish sentiment, the S&P's long-term breakout seems to be in need of rest, if not outright correction. If it successfully holds 1550, give or take a few dozen points, then stocks will be in good shape for a very long time.

NYC Mayor Bloomberg signs bill prohibiting e-cigarettes in same places that regular cigarettes are banned

Closing Market Summary: Stocks End Flat

The S&P 500 ended flat after spending the entire session inside of a four-point range. The quiet trading day did little to upset the S&P 500's return for the year as the index will enter tomorrow with a 29.1% year-to-date gain.

Interestingly, while the S&P 500 was challenged by its flat line throughout the session, the Dow Jones Industrial Average held just above its unchanged level for the duration of the day. The price-weighted Dow saw 19 of its 30 components finish in the green, but shares of Disney (DIS 76.23, +1.88) stood out with a 2.5% gain. The noteworthy strength ensued after Guggenheim upgraded the stock to ‘Buy' from ‘Neutral.'

Fittingly, Disney also provided a measure of support to the discretionary sector (+0.4%), which ended ahead of the remaining nine groups. Retailers and homebuilders factored into the sector's strength as the SPDR S&P Retail ETF (XRT 88.01, +0.44) and iShares Dow Jones US Home Construction ETF (ITB 24.68, +0.07) added 0.5% and 0.3%, respectively.

The discretionary sector was the only area of strength among cyclical groups. The materials sector (+0.04%) eked out a slight gain, but had a limited impact on the broader market due to its small size. Meanwhile, the two top-weighted sectors—financials (-0.1%) and technology (-0.1%)—posted modest losses.

Another growth-sensitive sector, energy (-0.8%), spent the entire day at the bottom of the leaderboard while crude oil fell 1.1% to $99.20 per barrel.

Countercyclical groups fared a bit better as consumer staples (+0.3%), health care (+0.2%), telecom services (+0.04%), and utilities (+0.3%) all posted modest gains.

On a stock-specific note, Twitter (TWTR 60.51, -3.24) endured another rough session after falling 13.0% on Friday. Shares of the social media company slid 5.1%, which narrowed its December gain to 45.6%.

Even though the major averages ended little changed, volatility protection was in demand as the CBOE Volatility Index (VIX 13.53, +1.07) posted its second consecutive gain.

Trading volume was well below average as only 452 million shares changed hands on the floor of the New York Stock Exchange.

The bond market proved to be a one-way street today as Treasuries rallied throughout the session. The 10-yr yield slipped three basis points to 2.97%.

Today's economic data was limited to November Pending Home Sales, which ticked up 0.2% while the consensus expected an increase of 1.5%.

Tomorrow, the October Case-Shiller 20-city Index will be released at 9:00 ET, December Chicago PMI will be reported at 9:45 ET, and the December Consumer Confidence report will cross the wires at 10:00 ET. • Nasdaq +37.6% YTD • Russell 2000 +36.6% YTD • S&P 500 +29.1% YTD • DJIA +26.0% YTD

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BN 12/30 15:30 *CITYJET FRANCE PILOTS CALL FOR UNLIMITED STRIKE FROM JAN. 2

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CityJet France Pilots Call for Unlimited Strike From Jan. 2 2013-12-30 15:33:44.14 GMT

By Francois de Beaupuy Dec. 30 (Bloomberg) -- Pilots unions say they oppose Air France’s plan to sell CityJet to Intro Aviation under proposed terms.

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To contact the editor responsible for this story: Francois de Beaupuy at +33-1-5365-5051 or fdebeaupuy@bloomberg.net