>>> Asian Update

Asian Market Update: PBoC slows liquidity injections again; Australia trade remains in deficit

***Observations/Insights*** - GGP (not Facebook, as speculated) replaces Molex in SP500; GGP rises 3.5%, Facebook falls 1.5% in extended session. - US financial press reported that China Mobile and Apple reached a final agreement on iPhone distribution before separate reports indicated talks are still ongoing with nothing definitive to announce. - Australia terms of trade were in deficit for the 4th consecutive month in October; Exports to China rose 5% m/m and exports of coal were up 6.8%, while iron ore exports were revised down by about 3% for the prior month and fell again 0.8% in October. - PBoC skips a Thursday money market operation for the first time in 3 weeks; Also marks the biggest net drain of liquidity in 7 weeks.

***Economic Data*** - (AU) AUSTRALIA OCT TRADE BALANCE (A$): -529M V -350ME (4th consecutive deficit) - (JP) Japan MoF sells ¥2.18T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.648% v 0.605% prior; Bid to cover: 4.01x v 3.69x prior - (KR) SOUTH KOREA Q3 FINAL GDP Q/Q: 1.1% (2-year high) V 1.1% PRELIM; Y/Y: 3.3% V 3.3% PRELIM - (PH) PHILIPPINES NOV CPI M/M: 0.4% V 0.4%E; Y/Y: 3.3% V 3.5%E; CPI CORE Y/Y: 2.8% V 2.5% PRIOR - (TW) TAIWAN NOV CPI Y/Y: 0.7% V 1.0%E PRIOR; WPI Y/Y: -1.0% V -0.9%E PRIOR

***Fixed Income/Commodities/Currencies*** - (CN) PBoC won't conduct open market operations (OMO) in today's session; Drains net CNY47B this week v injected 17B prior (first net drain in three weeks, biggest drain in 7-weeks) - (CN) Daily Shibor fixings: O/N: 3.7030 % v 3.7235% prior (3rd consecutive decline); 1-week: 4.5580 % v 4.5770% prior (2nd consecutive decline) - GLD: SPDR Gold Trust ETF daily holdings fall 2.7 tonnes to 838.7 tonnes (lowest since Jan 2009)

- USD majors are rangebound in the Asian session despite the selloff in the US Treasury market on Wednesday following better than expected ADP jobs, with volatility subsiding going into the ECB/BOE policy decisions on Thursday and non-farm payrolls on Friday. EUR/USD traded some 15pips on both sides of the 1.36 handle, GBP/USD was listless around $1.6380, and USD/JPY was in a 30pip range around ¥102.20. AUD/USD sold off briefly following Australia trade data, falling below $0.9020 before a bounce back to $0.9040. AUD has been under overall pressure for the past 2 weeks, culminating with a brief test below the $0.90 figure in the US hours.

***Speakers/Political/In the Papers*** - (CN) China National Development and Reform Commission (NDRC): Looking to ease burden for smaller companies - Chinese press - (CN) Smog reported in Central and Eastern China for 3rd consecutive day - Chinese press - (CN) China Qinhuangdao coal price continues to rise to CNY590-600/t (highest level since early July)

- (JP) Japan govt expects stimulus to raise real GDP by 1ppt and create 250K jobs - financial press - (JP) Japan Coast Guard sighted 3 China vessles near disputed island territory (5th consecutive day) - Kyodo News - (JP) Moody's: Japanese corporates 2014 outlook stable; Moody's expects Japan's GDP to grow by 1%-2% in 2014, fuelled by structural reforms dubbed Abenomics. Economic optimism has led to higher corporate earnings and cash flows, which have in turn reduced financial leverage. - (JP) Japan to list nuclear power as important energy source - Japanese press - (JP) Housing industry execs said to be less pessimistic over the negative impact of rising sales tax than the last time consumption tax went up in 1997 - Nikkei

- (AU) Australia PM Abbott: South Korea and Australia have reached an agreement on free trade deal (FTA) - addressing parliament - (AU) Moody's: Australia non-financial corporate outlook stable in 2014; Expects 2014 GDP at 2.0-3.0%, 2015 GDP at 2.5-3.5%

- (PH) Philippines Central Bank: Inflation likely to rise in coming months due to the typhoon

- (ES) Moody's changes Outlook on Spain govt bond rating to Stable from Negative; Affirms Baa3 rating

***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -0.4%, S&P/ASX -0.8%, Kospi -0.5%, Shanghai Composite -0.1%, Hang Seng -0.3%, Dec S&P500 flat at 1,791, Feb gold -0.8% at $1,237, Jan crude oil +0.2% at $96.42/brl

US markets: - KFY: Reports Q2 $0.38 v $0.34e, R$238.0M v $234Me; +4.4% afterhours - GGP: To enter S&P500 index; effective Dec 9th close; +3.6% afterhours - NUAN: Investor Icahn raises stake to 18.72% - filing; +2.1% afterhours - VRNT: Reports Q3 $0.80 v $0.65e, R$224.3M v $224Me; +1.6% afterhours - ENB: Guides initial FY14 C$1.84-2.04 v C$1.91e; Raises quarterly dividend 11% to $0.35/shr from $0.315/shr; +0.9% afterhours - DIS: Increases annual cash dividend 15% to $0.86 from $0.75; +0.5% afterhours - GES: Reports Q3 $0.42 v $0.39e, R$613.5M v $617Me; +0.3% afterhours

- SNPS: Reports Q4 $0.56 v $0.55e, R$504.9M v $507Me; -4.1% afterhours - ARO: Reports Q3 -$0.29 (adj) v -$0.25e, R$514.6M v $516Me; -6.0% afterhours - WTSL: Reports Q3 -$0.12 (adj) v -$0.12e, R$127.7M v $134Me; -15.7% afterhours

Notable movers by sector: - Consumer discretionary: Fairfax Media Ltd FXJ.AU +5.8% (to sell Stayz); China Weaving Materials Holdings Ltd 3778.HK +50.6% (FY13 guidance); Qantas Airways Ltd QAN.AU -11.4% (H1 guidance); China Huiyuan Juice Group 1886.HK -0.7% (share issuance) - Industrials: Nufarm Ltd NUF.AU -6.5% (H1 guidance); Samsung Engineering Co Ltd 028050.KR +1.9% (awarded order); CPI Yuanda 600292.CN +2.9%, Fujian Longking 600388.CN +3.0%, Beijing SPC Environmental 002573.CN +2.4%, Kelin Environmental 002499.CN +7.6% (smog reported in China for 3rd consecutive days) - Financials: Westfield Group WDC.AU -2.0% (buys WTC retail facilities) - Healthcare: Daiichi Sankyo Co Ltd 4568.JP -2.3% (product halt) - Telecom: China Telecom 941.HK +0.8% (speculate Apple agreement)

>>> US After Hours

After Hours Summary: MFRM +12.3%, KFY +4.4%, MVNR +4.1%, WTSL -15.7%, EXA -4.3%, SNPS -4.3%, ARO -3.9% following earnings/guidance After Hours Gainers: Companies trading higher in after hours in reaction to earnings: MFRM +12.3%,KFY +4.4%, MVNR +4.1%, ENB +1.2%, NWY +1.2%, VRNT +0.8%

Companies trading higher in after hours in reaction to news: PBYI +19.0% (reported positive top line data from I-SPY 2 TRIAL; neratinib graduates from I-SPY 2 TRIAL), GGP +5.1% (to replace MOLX in the S&P 500), EQIX +1.9% (announced $500 mln share repurchase program), NUAN +1.7% (Carl Icahn increases stake in Nuance to 18.72% from $16.9%), CLMS +1.5% (announced Nick Calamos is leaving the Calamos Board of Directors; John P. Calamos, Sr., Chief Executive Officer and Global Co-Chief Investment Officer of Calamos Investments, announced his intention to form Calamos Partners), ENB +1.2% (increases dividend by 11%), SUNE +1.1% (co and Mayor Bloomberg introduce New York City's largest solar energy project)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: WTSL -15.7%, EXA -4.3%, SNPS -4.3%, ARO -3.9%, MDXG -3.9%, EMKR -3.6%, AVGO -1.7%, GES -0.4%

Companies trading lower in after hours in reaction to news: FLML -5.1% (announced $15 mln line of credit), LGP -5.0% (commenced public offering of 3.1 mln common units representing limited partner interests in the Partnership), MDXG -3.9% (announced next steps after discussions with FDA - will pursue IND and BLA process for certain micronized products), SWY -2.4% (Jana Partners lowers stake to 4.1% - amended 13D filing; down from 6.2% previously reported on 9/17), FB -1.7% (not added to the S&P 500, as had been rumored), ARCP -1.7% (launched a reopening of $150 mln of its 3.00% convertible senior notes due 2018 and an offering of $225 mln of its convertible senior notes due 2020)

>>> US Close Dow-0,16% S&P-0,13% Nasdaq+0,02%

Closing Market Summary: Stocks End Little Changed Following Roller Coaster Ride The S&P 500 shed 0.1%, registering its fourth consecutive decline. Today's session proved to be a bit of a roller coaster ride for stocks as the S&P 500 opened in the red, rallied into positive territory, fell to fresh lows, and regained the bulk of its losses into the close.

For the second day in a row, the early weakness coincided with heavy selling in Europe. In addition, bonds and risk assets were pressured by a better-than-expected ADP Employment report, which indicated employment in the nonfarm private business sector rose by 215K in November (160K consensus). The report increased expectations for a strong nonfarm payrolls report on Friday, and re-invited speculation about the Fed's tapering timeline. Treasuries sold off following the data, sending the 10-yr yield higher by five basis points to 2.83%. The opening losses were followed by a swift reversal after below-consensus ISM Services (53.9 actual versus 55.0 expected) for November and a ho-hum composite home sales report for September (354K actual versus 432K consensus) and October (444K actual versus 420K expected) raised some doubts about the sustainability of the economic improvement. This calmed some of the tapering fears, and helped the major indices regain their flat lines. Contributing to the rebound, were rumors suggesting Democrats and Republicans reached a budget agreement. The budget deal rumors faded shortly thereafter while equity indices responded with a fade of their own. The S&P 500 tumbled to fresh lows, but was able to springboard off the 1,779 level and rally back to its flat line.

In large part, the late-afternoon rebound was powered by three sectors—financials (+0.2%), technology (+0.2%), and materials (+0.5%)—that outperformed throughout the session. Outside of the three, only the utilities sector (+0.2%) finished with a gain. Notably, the materials sector received all-around support from most of its components. Steelmakers and miners outperformed as the Market Vectors Steel ETF (SLX 47.99, +0.39) gained 0.8% and Market Vectors Gold Miners ETF (GDX 21.22, +0.65) jumped 3.2%. On a related note, gold futures spiked 2.0% to $1244.60 per troy ounce. The other commodity-linked sector, energy (-0.4%), ended among the laggards while crude oil added 1.2% to $97.19 per barrel. Today's trading volume was just above average as more than 756 million shares changed hands on the floor of the New York Stock Exchange.

Looking at today's remaining economic data, the October trade deficit fell to $40.6 billion from an upwardly revised $43.0 billion. In large part, the decline was due to significant gains in sales of artwork (+$0.50 billion), gem diamonds (+$0.40 billion), and jewelry (+$0.40 billion). The consensus expected the trade deficit to fall to $40.5 billion. Separately, the weekly MBA Mortgage Index tumbled 12.8% to follow last week's downtick of 0.3%. Tomorrow, November Challenger Job Cuts will be reported at 7:30 ET while weekly initial claims and the second estimate of third quarter GDP will be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of October Factory Orders.

o Nasdaq +33.7% YTD o Russell 2000 +32.0% YTD o S&P 500 +25.7% YTD o DJIA +21.3 YTD

(BFW) *MICROSOFT WINS EU APPROVAL FOR 5.44 BILLION-EURO NOKIA DEAL

+------------------------------------------------------------------------------+

BN 12/04 16:35 *MICROSOFT WINS EU APPROVAL FOR 5.44 BILLION-EURO NOKIA DEAL

+------------------------------------------------------------------------------+

*MICROSOFT WINS EU APPROVAL FOR 5.44 BILLION-EURO NOKIA DEAL 2013-12-04 16:35:46.667 GMT

--PATRICK MCHALE

-0- Dec/04/2013 16:35 GMT

WSJ : Abercrombie Is the Best Teen Retail LBO Candidate

Among the teen retailers under fire from activist shareholders, Abercrombie & FitchANF is the best candidate for a leveraged buyout, according to two analysts.
Activists have been circling both Abercrombie & Fitch and its competitor Aéropostale in recent months. These shareholders have pushed both companies to consider selling themselves.
One of those analysts FBR’s Susan Anderson says Abercrombie would be significantly more attractive to private-equity firms than Aéropostale and its other key competitor American Eagle.
Why? Ms. Anderson says it is a combination of its low leverage, solid free cash flow and its current valuation.
One of the biggest roadblocks to a buyout right now: Abercrombie’s management. But that could soon change. The CEO and Chairman Michael Jeffries’ contract is set to expire on Feb. 1. He has been seen as opposed to any buyout and Ms. Anderson notes that he hand-picked Abercrombie’s board. One activist circling the retailer, Engaged Capital, is pushing the board to begin a search for a successor to Mr. Jeffries.
Despite new interest from activists, Abercrombie’s shares haven’t moved much in the past few months, and its stock is down 26% this year.
By contrast, Aéropostale’s stock has jumped on speculation of a possible buyout. Its stock is up 18% since rumors started in September, but is also down 28% in 2013.

>>> Kering Confirms entry into exclusive negotiations concerning the sale of the

Kering Confirms entry into exclusive negotiations concerning the sale of the La Redoute and Relai Colis unit
- Considering four offers
- Management has taken the decision to enter into exclusive negotiations with Nathalie Balla, current chairman and CEO of La Redoute, who joined it in 2009, and Eric Courteille, Chief administrative officer of Redcats since 2009. They have presented a takeover plan for La Redoute and Relais Colis, supported by a team of managers from these companies.
- Under the terms of the negotiation offer, the buyers would create a new entity and would invest in it in a personal capacity. This body would be co-chaired by Mrs Balla and Mr Courteille, who would jointly have the majority shareholding, the remainder of the capital being held by a team of managers. This company would acquire all the shares of La Redoute, Redoute International and Relais Colis.

>>> Potential Sale of Water Would Leave Earth, Wind and Fire

Potential Sale of Water Would Leave Earth, Wind and Fire

In late-July 2013, Ashland Inc. (NYSE-ASH) announced that it was exploring strategic alternatives for its Water Technologies unit, including a potential sale. On its 4Q FY13 earnings call (11/5/13), ASH reiterated that it expects to make an announcement regarding the water business segment in calendar 1Q14. The plan to streamline its operating units from four to three came about three months after Jana Partners LLC (“Jana”) made a 13D filing on 4/11/13 (5.8M shares or 7.4% S/O, acquired in 2013); Jana subsequently made another 13D/A filing on 9/20/13 (6.5M shares or 8.4% S/O). In mid-May, ASH announced a $600M share repurchase program (including a $150M ASR, executed at a price of $86.32 for ~1.7M shares delivered in June), which replaced its previous $400M program. In addition, ASH refinancing its senior debt issued with $2.3B of new senior notes (4.37% blended interest rate); $600M is due 2016 and $700M is due 2018). Last, the company announced in October a restructuring program with annualized cost savings of $150M-$200M; the program will start in FY14 and reach a full run-rate in 12-15 months. The announcement of a strategic review, the encampment of an activist investor, the expanded share buyback, the repayment extension and reduced debt financing and the restructuring program are all positive developments for ASH shareholders. The company’s operating segments include Specialty Ingredients (polymers), Water Technologies, Performance Materials (resin and adhesives) and Consumer Markets (Valvoline and related brands); earnings are lumpy due to cyclicality, commodity inputs, discretionary consumer budgets and international trade factors. Selling the Water Technologies unit (with its high single digit EBITDA margin and weak revenue growth) would help simplify the investment story and improve the overall EBITDA margin, potentially leading to margin expansion. The potential transaction value was recently reported to be up to $1.5B (based on a rumored joint bid by Danaher Corp. (NYSE-DHR) and Blackstone (NYSE-BX)). The company has stated any deal proceeds would be primarily used to return value to shareholders (such as funding the share repurchase program). Given the recent debt refinancing, ASH could pay a substantial one-time dividend; $8-$12/share would require $620M-$930M. We note that ASH has aggressively increased its quarterly dividend the past two years; the May 2013 payment finally exceeded the previous high (in 2008). The company’s current 1.5% dividend yield is in the mid-range of our specialty chemicals peers. Despite the all-encompassing nature of the initiatives, we feel investors have yet to fully embrace the potential improvements as reflected by the current stock price. The ASH CY14E valuation multiples ($92.15 closing price and a $10.1B EV) are 1.2x EV/Revs, 7.6 EV/EBITDA (16% margin) and 13.1x P/E (1.4 PEG ratio to 9.4% LT growth). ASH trades at the low end of our peer group multiple range of 7.5x-10.5x EBITDA; an 8.5x-9.0x multiple range would imply an ASH value of $109-$118/share, with every 0.5x multiple worth ~$8.50/share. We believe some of the multiple discount is due to debt leverage of 2.5x FY14E EBITDA (vs. 2.0x leverage in FY13); ASH has below investment grade debt ratings (Ba1/BB/B+) as a result of acquiring International Specialty Products for $3.2B cash in 2011. In addition, fluctuating commodity costs have primarily impacted two operating units - Specialty Ingredients (the largest and most profitable segment) and Performance Materials (the smallest and least profitable). Consumer Markets has benefited from the economic recovery, but this growth trend is expected to moderate in 2014. Water Technologies has had the most consistent profitability over the past three years, which makes it the ideal candidate for a private equity acquisition or a leveraged buyout. While a sale of this business unit would allow for a small recapitalization (i.e. share repurchases) and potential return of equity to shareholders, we believe more value can be created from operational improvements and (more importantly) revenue/volume growth. Last, ASH also intends to sell its Elastomers unit (Performance Materials), but that is a relative sideshow ($410M FY12 revenues) compared to monetizing the water segment. The Water Technology business reported $1.722B revenues and $153M EBITDA (8.9% margin) for FY13 (ended September). Assuming some nominal growth and $30M-$35M proportional allocation from the cost savings initiative, the segment’s 2014E P/F EBITDA would be in the $190M-$200M range. A $1.5B purchase price would imply a 7.5x-7.9x EV/EBITDA valuation multiple and could be financed with up to 5x debt/EBITDA leverage. We conservatively estimate that 10% of the proceeds would be required for transaction expenses (including any gain-on-sale taxes) and another 30% would used to fund the remaining share buyback (4.75M shares at $95/share resulting in ASH P/F 72.8M S/O). A $10/share special dividend would require ~$775M; that would leave $125M for general corporate purposes. We note that most of the company’s $346M cash balance (as of 9/30/13) was held in foreign subsidiaries, subject to repatriation taxes; some additional cash cushion would be useful in lieu of borrowing to fund working capital. Using an ex-dividend $82/share price and P/F $6.3B Revs, $1.1B EBITDA (~17.5% margin), $6.15 EPS and $2.8B net debt, the P/F ASH 2014E valuation multiples would be 1.4x EV/Revs, 8.0x EV/EBITDA and 13.3x P/E. A 9.0x-9.5x EBITDA multiple (the median of out peer group mid-cap specialty chemical stocks) would imply a total value (including our $10/share special dividend assumption) of $107-$115/share. The ASH share price closed at $75.23 the week before and $78.83 the day before the Jana 13D was filed, or ~15% and ~10% below the $86.66 closing stock price on 4/12/13. The company’s share price has advanced only 6% since the day-after effect from the Jana filing. Based on 4/10/13 closing prices, the average price gain of our peer group (six companies) is ~21% (11%-42% range, 18.5% median), right inline with the ASH price gain over the same time period. ASH has not helped itself; the company widely missed (~9%) consensus 3Q FY13 EPS and had underwhelming 4Q FY13 results. We see two key catalysts for the ASH stock price; the sale of Water Technologies (which could come with the release of 1Q FY14 results or the annual meeting, both of which typically occur the last week of January) and improved EBITDA margins (“consistent with the top quartile of its specialty chemicals peer group”). The first catalyst appears to be close-in-hand, while the second one is a taller (but theoretically manageable) hurdle. However, investors have been notably cautious in the absence of neither to-date, and as a result the stock has underperformed as it up only 14% YTD. Overall, we view ASH as an early 2014 story that investors may be overlooking at year-end 2013.