TheChek News Flow

Asian Market Update: Japan Nov inflation at 5-year highs; China market outperforms the region Fri, 27 Dec 2013 1:04 AM EST

***Observations/Insights*** - The Asian bourses were mainly trading in positive territory following another solid performance out of the US markets and overall upbeat data out of Asia. The Nikkei225 started the session higher while the yen tumbled against the USD and euro. A strong USD tested the 105 yen barrier, the highest since October 2008. Despite the strong USD and overall positive Japan economic data, the Nikkei225 reversed earlier gains on profit taking. - Japan inflation data for November rose for the sixth consecutive month to 1.2% beating expectations and brought Japan closer to the 2% target set by the BOJ. - Japan Nov retail sales came in at the fastest pace since Apr 2012 at 4.0% on the year comfortably beating expectations, while preliminary industrial production data came in at 0.1% less than the 0.4% expected. The government maintained its assessment of industrial output adding that it continues to show upward movement. - China reported industrial profits increased 13.2% on the year, a half percentage point slower than the pace in the prior reading. China stocks rose, along with the Hong Kong market, as low valuations attracted the interest of investors.

***Economic Data*** - (JP) JAPAN NOV PRELIM INDUSTRIAL PRODUCTION M/M: 0.1% V 0.4%E; Y/Y: 5.0% V 5.4%E - (JP) JAPAN NOV NATIONAL CPI Y/Y: 1.5% V 1.5%E; CPI EX FRESH FOOD Y/Y: 1.2% V 1.1%E (largest increase in 5 years; 6th consecutive increase) - (JP) JAPAN DEC TOKYO CPI Y/Y: 0.9% V 0.9%E; CPI EX FRESH FOOD Y/Y: 0.7% V 0.7%E - (JP) JAPAN DEC MARKIT/JMMA MANUFACTURING PMI: 55.2 V 55.1 PRIOR (10th straight month of expansion; highest reading since July 2006) - (JP) JAPAN NOV RETAIL TRADE M/M: 1.9% V 1.0%E; Y/Y: 4.0% V 3.0%E; LARGE RETAILERS' SALES Y/Y: 0.6% V 0.7%E - (JP) JAPAN NOV JOBLESS RATE: 4.0% V 3.9%E; JOB-TO-APPLICANT RATIO: 1.00 V 0.99E (highest reading since Oct 2007) - (JP) JAPAN NOV VEHICLE PRODUCTION Y/Y: 10.2% V 10.1% PRIOR - (JP) Japan investors sold net ¥680.6B in foreign bonds last week vs bought net ¥110.5B in prior week; Foreign Investors bought net ¥838.3B in Japan stocks v bought net ¥619.3B in prior week - (JP) JAPAN NOV OVERALL HOUSEHOLD SPENDING: 0.2% V 1.8%E (3rd consecutive increase) - (CN) CHINA NOV INDUSTRIAL PROFITS Y/Y: 9.7% V 15.1% PRIOR; YTD: 13.2% V 13.7% PRIOR - (JP) JAPAN NOV LABOR CASH EARNINGS Y/Y: 0.5% V 0.3%E - (KR) SOUTH KOREA JAN MANUFACTURING BUSINESS SURVEY: 79 V 78 PRIOR; NON-MANUFACTURING SURVEY: 70 V 72 PRIOR - (PH) PHILIPPINES OCT TRADE BALANCE: +$202M V -$700ME - (TH) THAILAND NOV MANUFATURING PRODUCTION INDEX ISIC Y/Y: -10.6% V -11.4%E - (US) Weekly Fed Balance Sheet Assets Week ending Dec 25th: $3.985T v $3.965T prior; M1: +$5.7B v +$3.7B prior; M2: +$5B v +$17.5B prior

***Fixed Income/Commodities/Currencies*** - USD/CNY: (CN) PBoC sets yuan mid-point at 6.1050 v 6.1156 prior setting (record high setting for yuan) - (JP) Bank of Japan (BOJ) offers to purchase ¥400B in 5-10yr JGB and ¥200B in JGB with maturity over 10-yr

***Speakers/Political/In the Papers*** - (JP) Japan civil service fund reduces JGB allocation - financial press - (JP) Japan steelmakers awarded 6% price cut for coking coal (lowest since Q3 2010) - Japanese press

- (CN) China Ministry of Commerce (MOFCOM) reiterates China 2013 retail sales to rise 13% y/y; sees industrial production up about 9.8% - Chinese press - (CN) China Human Resources: China urban registered jobless rate approx 4.1% by end of 2013 - Chinese press - (CN) China central SOEs Jan-Nov profit CNY1.2T, +7.5% y/y, Rev CNY21.8T, +9.5% y/y - People's Daily - (CN) China national audit office head: to monitor existing government debt risks and new government debt raising - Chinese press - (CN) China sets asset requirements for key shareholders of public funds - Chinese press

- (KR) South Korea releases 2014 policy report: Raises 2013 GDP forecast to 2.8% from 2.7% prior; Cuts 2014 GDP forecast to 3.9% from 4.0% prior - (KR) South Korea reportedly may allow banks to tap up to $10B from fx reserves - financial press - (IN) India PM Singh said to be not interested in a third term - financial press

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -0.6%, S&P/ASX -0.1%, Kospi +0.1%, Shanghai Composite +0.9%, Hang Seng +0.3%, Mar S&P500 -0.1% at 1,835, Feb gold -0.1% at $1211, Feb crude oil -0.1% at $99.47/brl

US markets: - TXT: To acquire Beechcraft for $1.4B in cash; +2.2% afterhours

Notable movers by sector: - Materials: Bluescope Steel BSL.AU +1.8% (expansion plans); Kobe Steel; 5406.JP +1.7% (price adjustments) - Healthcare: Takeda Pharmaceutical 4502.JP -5.0% (terminates development for fasiglifam); Beijing Tiantan Biological Products 600161.CN -3.6% (Hepatitis B Vaccine issue) - Technology: Telling Telecommunications 000829.CN +4.7% (awarded license); China Spacesat Co 600118.CN +2.0% (forecasted satellite coverage) - Industrials: China International Marine Containers Group 2039.HK +14.0% (H-share issuance); Dongfeng Motor: 489.HK -3.5% (bond sale delay); China CSSC Holdings 600150.CN +6.6%

Japan investors to use UK-style code

Investors in Japan will soon be bound by the country’s first code of conduct covering engagement with companies, which should encourage shareholders to challenge executives on thorny matters such as low dividend payouts and a lack of independent directors. From May, any investor owning or managing Japanese stocks will be expected to follow a new seven-point code. The framework borrows heavily from the UK’s Stewardship Code, which was drawn up in 2010 with the aim of stopping directors sanctioning the deals and excessive pay awards that were blamed for fuelling the financial crisis and which has served as a template for similar codes in Canada, South Africa and the Netherlands. Adherence to the new Japanese code – which, as in the UK, will be run on a "comply or explain" basis – should "spur collaboration among domestic investors regarding shareholders’ common interests", said Naoki Kamiyama, chief equity strategist at Bank of America Merrill Lynch in Tokyo. The effort is part of a broad sweep of measures under the so-called third arrow of the government’s ambitious growth programme, which aims to improve the country’s long-term competitiveness through a series of reforms. Related initiatives include an overhaul of the public pension system – under which giant institutions such as the Government Pension Investment Fund have been directed to manage their bond-heavy portfolios more aggressively – and the launch of a new stock index designed to squeeze out unprofitable companies with weak standards of corporate governance. The overarching aim is to haul investors out of the deflationary mindset in which it was "rational" to hold cash and bonds and to accept feeble returns from equities, said Tomoyuki Furusawa, director of the policy and legal division at the FSA. Excitement over the programme, which also includes radical monetary and fiscal stimulus, has drawn a record $142bn of foreign investment into Japanese stocks this year, helping the benchmark Nikkei 225 stock average beat every other developed market this year in local currency terms. "We are trying to jump from one equilibrium to another, so the whole financial system needs to prepare," said Mr Furusawa. The first draft of the new Japanese code – published for comments by the FSA on Thursday – differs from the UK code in a couple of respects. Principle five of the UK code, requiring investors to be willing to take part in collective actions "where appropriate", is likely to be replaced in Japan by a milder principle requiring investors to engage with each company based on a "deep understanding", exchanging views with other investors if necessary. There is also no definition of the "major items" on which investors will be expected to disclose the way they voted. Still, Toshiaki Oguchi, executive director of Go Japan, an activist group, and one of 13 members on the FSA’s advisory council, said the Japanese version was remarkable because it started from the assumption that stronger corporate governance could lead to a more vigorous economy. For Japan, where many companies routinely put the interests of shareholders behind those of lenders, customers and suppliers, this is a big departure, he added. "Japan has a history of recognising activists as ‘bad guys’. But constructive engagement is a good thing, for both investors and companies and society as a whole. This is a positive change of mind."

Batista deal slashes value of holdings

Shares of the oil flagship of Eike Batista, the former Brazilian billionaire, soared on Thursday after the company announced an unexpectedly quick debt restructuring deal with creditors. The $5.8bn agreement with creditors that was announced late on Christmas Eve sent stock of Óleo e Gás Participações, formerly known as OGX, up as much as 31.6 per cent before moderating their gains to about 21 per cent in late trade to finish at R$0.23 per share. The rise in the share price followed a Christmas day announcement by OSX, Mr Batista’s oil services company and a key creditor of the former OGX with $1.5bn in claims from cancelled contracts, saying it would also abide by the restructuring. "If the [restructuring] is implemented in the form contemplated, OSX will retain . . . about 7 per cent of the share capital of the restructured company," OSX said in its statement. The debt for shares exchange with creditors marks a final blow for Mr Batista, who will be forced to hand over control of the company he once styled as the private sector answer to Petrobras, the state oil company that has a near monopoly over Brazil’s fossil fuel industry. The restructuring of OGX will reduce Mr Batista’s direct stake in the former keystone company of his oil, mining, energy and logistics empire from about 50 per cent presently to 10 per cent. With a market capitalisation, based on the latest prices, of R$776.64m, according to Bloomberg data, that means Mr Batista’s direct stake in the company will be worth only about R$78m after the deal. This represents a spectacular fall from three years ago when the stock was priced at nearly R$21 per share. Even in January this year it was priced at up to R$5.36, at which level Mr Batista’s direct stake would have been worth about R$9bn based on his current shareholding. The company’s implosion led to his ejection this year from the Forbes’ billionaires list. He was once Brazil’s richest man with a fortune of more than $30bn. Shares of OSX also soared on Thursday, rising 32.6 per cent to R$0.61 per share on hopes that the restructuring deal will mean it will survive as a going concern. The news of the quick resolution with OGX creditors – which will be formally sealed with bondholders on January 24 – came as unexpected to those observers who had expected a drawn-out battle in Brazil’s often Byzantine court system. The settlement of the creditor problems at OGX and OSX will make it easier for Mr Batista, who has also sold off most of his significant interests in the other listed companies in his empire, to attempt a return to the business world. However, bankers say he will continue to struggle with debts at the unlisted parent company level of the group. Eike Batista was leveraged "up to the 21st floor", said one banker in São Paulo.

After Hours Summary: ANIP +5.1% (acquires 31 generic drug products from Teva)

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: none of significance.

Companies trading higher in after hours in reaction to news: - WPCS +19.2% (announces public beta release of BTX Bitcoin trading platform), - ANIP +5.1% (acquires 31 generic drug products from Teva Pharmaceuticals for $12.5 mln in cash and a % of future gross profits).

After Hours Losers:

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

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

Closing Market Summary: S&P 500 Logs Fourth Consecutive Gain

Not much stood in the way of the major averages on Thursday as they continued their year-end rally. The Dow Jones Industrial Average (+0.8%) logged its sixth consecutive gain while the S&P 500 (+0.5%) posted its fourth advance in a row. However, both ended the session at fresh record highs.

Despite the steady, day-long rally in the Dow and S&P, the Nasdaq (+0.3%) spent the entire session inside of a ten-point range, and settled essentially where it started the day. The tech-heavy Nasdaq saw its rally attempts short-circuited by its top component, Apple (AAPL 563.90, -3.77), which fell 0.7%. Meanwhile, the S&P technology sector inched higher throughout the day and settled with a modest gain of 0.3%. Outside of technology, the financial sector (+0.2%) was the only cyclical group that could not keep pace with the broader market. The remaining four cyclical sectors—consumer discretionary (+0.6%), energy (+0.9%), industrials (+0.7%), and materials (+0.6%)—all finished ahead of the S&P.

Of those four outperformers, energy and industrials provided leadership from the opening bell. The energy sector maintained its relative strength into the close while crude oil was limited to an increase of 0.4% (to $99.59/bbl). Top-weighted components, Chevron (CVX 124.81, +1.30) and ExxonMobil (XOM 100.90, +1.68) underpinned the growth-sensitive sector and their strength also factored into the outperformance of the Dow. The price-weighted Dow also drew strength from 3M (MMM 138.29, +1.30) and Boeing (BA 138.27, +1.44), both of which helped the industrial sector (+0.7%) end not far behind energy. Over on the countercyclical side, the third-largest S&P sector, health care (+0.7%), outperformed while consumer staples (+0.4%) and utilities (-0.4%) lagged. For its part, the telecom services sector (+0.5%) finished in-line with the broader market. In part, the underperformance of utilities was rooted in the continued rise in yields. The 10-yr note slipped as its yield tested 3.000% before settling at 2.990%. Since the tapering announcement, the benchmark yield has added almost 11 basis points. Participation was well, well, well-below average as only 410 million shares (versus an average of 726 million) changed hands on the floor of the New York Stock Exchange. Did we mention that today's participation was on the light side? Although the broader market did not see much volume, Twitter (TWTR 73.21, +3.35) maintained its torrid pace on heaviest volume (82.5 million) since its market debut. The stock surged 4.8%, extending its December gain to 76.4%. Today's economic data was limited to weekly initial claims, which dropped to 338,000 from an upwardly revised rate of 380,000 (from 379,000) while the consensus expected a decline to 350,000. Seasonal adjustment issues have been a recurring theme in claims data for the past few months, and the trend continued in today's report.

There is no economic data of note on tomorrow's schedule.

o Nasdaq +38.0% YTD o Russell 2000 +36.9% YTD o S&P 500 +29.2% YTD o DJIA +25.8% YTD

PE firms may pay more than $1B in collusion case

It’s going to cost the world’s largest private-equity firms — including KKR and Blackstone — more than $1 billion to settle the bombshell collusion case slowly winding its way through a Boston federal court, The Post has learned. While no deal has been offered, shareholders in eight companies have indicated any future settlement would have to be north of $1 billion, a source close to the situation said. "I think there was a time the plaintiffs would have settled for $1 billion, but that time has passed," a source said. The value of the eight buyouts is $170 billion. Defendants are not ready to settle, sources said. The shareholders in 2007 sued KKR, Bain Capital, Silver Lake Partners, Blackstone Group, Carlyle Group, TPG Capital and Goldman Sachs Capital Partners and accused them of defrauding shareholders out of billions of dollars by colluding to keep prices artificially low when buying their companies. The firms agreed from 2004 through 2008 not to jump each other’s signed deals, it is alleged. Settlement talks could begin in earnest in coming months after a Nov. 3, 2014, trial date was set during a court hearing last week, two sources close to the situation said. The PE firms have tried 10 times since the 2007 case was filed to get it tossed. Each effort failed. Judge William Young, at a court hearing last week, said the court could offer the parties "alternative dispute resolution" by providing a mediator. The parties told the judge, several sources said, they already had a private mediator and had spoken several times. Neither side is satisfied with the numbers being bandied about, the source added. In March, the plaintiffs are expected to seek class-action status. Last month, Judge Young certified a class of Nexium drug buyers in a case brought by some of the same lawyers against AstraZeneca for blocking a generic version of a heartburn drug. The private-equity firms have joint responsibility in the suit, so if any of the defendants settled on their own it could put whatever firm or firms remained at great risk for financial loss. Much of the plaintiffs’ case rests on emails between top executives at the giant firms. This includes Blackstone’s Tony James writing to KKR’s George Roberts after one deal: "Together we can be unstoppable but in opposition we can cost each other a lot of money." "Agreed," Roberts answered, court papers said. The PE firms say there is no evidence of a master plan.

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BFW 12/26 17:02 French Nov. Number of Jobseekers Rise 17.8k BN 12/26 17:00 *FRENCH NOV. NUMBER OF JOBSEEKERS RISE 17.8 THOUSANDS

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French Number of Jobseekers Rose in November to 3.293 Million 2013-12-26 17:04:12.633 GMT

By Vidya Root Dec. 26 (Bloomberg) -- French jobless claims rose in November in a challenge to President Francois Hollande, who has pledged to reverse a rise in unemployment before year end. The number of people actively looking for work in France increased by 17,800, or 0.5 percent, to 3.293 million in November, the labor ministry said today in an e-mailed statement. Claimants peaked at a record 3.296 million in September, the result of a rise in joblessness that began in May 2011 and lasted for 27 consecutive months as Europe’s sovereign debt crisis plunged the region into recession.

For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story: Vidya Root at +33-1-5365-5018 or vroot@bloomberg.net

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Deutsche Telekom Hasn’t Decided If It Wants to Sell TMUS: CNBC 2013-12-26 14:58:54.558 GMT

By Joshua Fineman Dec. 26 (Bloomberg) -- Deutsche Telekom hasn’t made decision on selling T-Mobile US, not sure it wants to take on potential regulatory risk, CNBC’s David Faber said. * Softbank has been in talks with Deutsche Telekom on and off; talks have increased beyond “social niceties” as of late * Possible deal would be in 2014 * NOTE: Dec. 16, Faber says TMUS, Sprint not having talks * NOTE: Dec. 26, Nikkei said SoftBank to raise funds for TMUS purchase in U.S. * NOTE: Dec. 23, Oppenheimer said TMUS/S deal approval odds raised to two-thirds from 50/50

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

--Editor: Joanna Ossinger

To contact the reporter on this story: Joshua Fineman in New York at +1-212-617-8953 or jfineman@bloomberg.net

To contact the editor responsible for this story: Joanna Ossinger at +1-212-617-7789 or jossinger@bloomberg.net