LCM Dawn Patrol – 20.12.13 – WEEK END. Paris 15 top tables, JPM ups Mediaset, GS ups Telenet, GS on EM post tapering… More

Bonjour,

This is the last Dawn Patrol of the year. Merry Christmas and Happy New Year!

US equities finished narrowly mixed on Thursday. Tapering sentiment remained fairly positive with most of the focus still on the enhanced forward guidance. However, the resilience demonstrated by emerging markets and shorter-dated Treasuries was not repeated, a dynamic that may have acted as some semblance of an overhang. As usual, the corporate calendar offered some mixed and largely company-specific takeaways. However, a couple of the notable reporters in tech did seem to help dampen some of the macro concerns surrounding IT spending.
Asian equity markets traded mixed Friday morning. Liquidity concerns remained a concern in Greater Chinese markets. After the PBoC injected liquidity into the market post-close yesterday, the repo rate opened at 4.98% after closing at 7.10%. However liquidity concerns have persisted and the rate jumped to close to 10% in early trading. The news was also a headwind for the mainland’s 11th largest bank’s, China Everbright Bank, H-share debut in Hong Kong. The Bank of Japan did not surprise markets, leaving its monetary policy and the language of its statement unchanged.

It already feels like the year is over and volumes are low as investors prefer to protect existing gains. Markets reacted very well to the tapering announcement and the forward guidance despite the curve flattening.

Today, we’ll focus on the US Q3 GDP and in Europe the German Gfk consumer confidence index. Not sure about the BoJ policy statement timing (soon I guess)…

WEEK END

Merry Christmas!

http://www.youtube.com/watch?v=LuYnlLPItvc

RESTO: Paris top 15 restaurants (by Le Figaro)

PHOTO: Brassaï. Pour l’amour de Paris. Hôtel de Ville.

KINO: Belle et Sebastien. Yes, it’s for the whole family.

DISCO: Anouar Brahem – Astrakan Café.

NEWS

• More Than 80 Injured in Theater Collapse in London’s West End
• U.K. November Consumer Sentiment Falls for Third Month: GfK
• BOE Says U.K. Borrowers Vulnerable to Increasing Mortgage Rates
• Easy Money Fanning Sweden’s Overpriced Housing Market: S&P
• European Leaders Delay Deal on Incentives for Economic Reforms
• Covered Bonds Given Second-Class Status in EU Liquidity Review
• Ukraine Devaluation Bets Still On After Russia Bailout Pledge

BBVA Says It’s Taking Part in Corpbanca Sale Process
Bouygues (EN FP): Chairman Martin Bouygues says he is ready to start an internet price war with telecoms rival Free.
Deutsche Bank Said to Consider Sale of Uranium-Trading Business
Gfk Decreases Goodwill on Acquisitions By EU112.5m
Saint-Gobain (SGO FP): The building materials maker agrees to sell its U.S.-based Fiber Cement siding business to Plycem USA. The transaction will be finalized in the first quarter, it says.
Schindler to Take Further Impairment on Hyundai Elevator Stake
Thales Wants to Double German Sales in 10 Years, Echos Says

CURRENT STUFF

On a different subject… You may have read this FT article on the EU banking union… “There will eventually be a €55bn resolution fund, use of which will be decided by a cast of well over 100 people.” Here: EU banking union: progress of sorts

BAE Systems suffered a bruising setback after Britain’s negotiations to supply 60 Typhoon fighter jets to the UAE collapsed and pricing talks on a separate deal with Saudi Arabia stalled. (Financial Times)

STRATEGY

GS (Eoyang) EM Post Tapering: More local differentiation.
2014: A difficult road at first

The first challenge for EM will be to navigate the change in DM monetary conditions. Now that tapering is happening, we feel equities will respond to more local issues (rates, FX, and policy) than taper fears. Over time, the DM recovery and reform stories should play out in earnings and valuations.
Our 2014 country preferences (China, Russia, Mexico Korea) are aligned with the political calendar, C/A surpluses, reform implementation, and DM exposure. Reform progress should be particularly important, as it represents an active attempt to break with the habits of the past.

UPS&DOWNS

Hannover Re (Wasilewicz) Negative RTI
We believe the share price will fall relative to the industry over the next 30 days. With a relatively high premium-to-equity leverage together with material exposures to short-tail US insurance lines, we think Hannover Re stock may face pressure if the renewals at 1/1 are less benign than anticipated. We estimate that there is about a 70% to 80% or “very likely” probability for the scenario.

Mediaset (JPM, Pietro Lo Franco) The cherry on the cake. Upgrading Mediaset from Neutral to Overweight
We upgrade Mediaset Italy (MS) to OW from N and increase our Dec-14 PT to €4.3 (from June-14 €3.7) for the following reasons: i) JPM Economists are optimistic on the Eurozone in ’14 (MS generates 76% of its revenue in Italy and 24% in Spain via its 41.2% stake in MS Espana); ii) After reaching trough levels in ’13 we expect MS adv. revenue to rebound in ’14; iii) MS has successfully reduced operating costs and increased operating leverage; iv) based on our mid cycle valuation analysis, the stock should trade at €4.4 (implying 31% upside to current share price); v) potential spin-off of MS Pay TV activities could add €0.4 to our new €4.3 PT (see our 10 Apr. ‘12 report).

Carrefour (JPM, Vazquez) TP raised to €31 on view that FY13 could exceed expectations
Following Carrefour’s strong market share data in France, we reiterate our OW rating and raise our multiples-based Target Price from €30 to €31 as we roll it over to Dec14 (prev. Sep-14) and we gain increased confidence in the company’s long-term sustainable margins. Shorter term, we remain optimistic on the company’s scope to exceed expectations in 2H13 results.

Telenet (GS, Boddy) Buy: Premium cable growth, further share take in mobile; upgrade to Buy
We upgrade to Buy, with our new 12M PT implying +21%. TNET tops our structural quality framework. We see premium RGU growth in fixed with continued share take in mobile. Valuation remains attractive given the group’s sector-leading growth and returns.

Europe: Energy: Oil Services (GS, Tarr) Clear signs of deterioration emerging; remain Cautious
We have seen four profit warnings in the last week driven by project delays and more cautious customer spending. We see further problems in 2014 as capacity additions hit. We downgrade TGS and Prosafe to Sell, and reiterate our Cautious sector view.

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