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The Round Up
27 September 2010
Issue No. 417
Daily Monitor
Equity Structured Products and Warrants
Overnight Commentary
ECO - Non Defence Capital Goods Orders, which are closely watched as a proxy for business spending, came in at 4.1%
vs. 3% exp and outweighed the negative New Home Sales number which came in at 288k vs. 295k exp. Durable Goods
were weaker than expected at -1.3% vs. -1% but the Ex-Transport number was 2% vs. 1%.
Movers - Growth proxies were the standouts as the global outlook brightened; CAT, GE and Boeing adding 3.1% to
4.5%. Tech plays were stronger with Cisco Systems, United Tech and Intel adding 2.4% to 2.6% and the DJ
Construction Index managed to ignore the weak home sales number, adding 2.9% as KB Homes posted a smaller than
expected 3rd quarter loss. Sentiment was given an added boost as it was revealed that the Petrobras sale of nearly
$70B in shares was oversubscribed. The US traded stock adding 2.9%.
Equity Structured Products and Warrants
Commodities Commentary
Last % Move
GOLD 1298 0.5%
OIL #N/A -1.8%
NI 22900 0.6%
AL 2317 1.1%
ZN 2247 -0.1%
CU 7945 0.8%
CRB 1.2%
SPI Commentary
The SPI traded down 43 pts to 4620. Open at 4663 with a high of 4668 and a low of 4597. Volume 24,620. Overnight the SPI traded up
53 pts to 4677.
*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS
Source: Bloomberg
The chart above illustrates the gap that has opened up since the beginning of July. The XJO has outperformed the
DOW/S&P500 indices by 13.1% in this period. To play this pairs trade you can Short XJO and Long S&P500 using
XJOKZQ and SPFKZA MIINIs. Both the AUD and XJO have had substantial run-ups and we recommend that you look
to lock-in these gains with a short XJO but maintain your market exposure with a Long S&P.
Source: IRESS
Source: IRESS
Total emerges with a 20% equity stake in GLNG and 1.5mtpa of off-take
STO has sold-down 15% for A$650m, which was well below the A$850m implied by the Petronas deal. Unfortunately,
STO has also been forced to forgo its US$500m second train FID payment, in return for Petronas agreeing to up its off-
take to 3.5mtpa (from 2mtpa with a 1mtpa option). On top of this, STO has vended in some more of its CSG acreage at nil
cost, although management wasn't able to put a contingent resource number on the size.
No change to RBS Research’s Santos valuation and target price just yet
RBS Research will be refining the valuation assumptions over the coming weeks as the project moves closer to FID. In
isolation, the second train FID payment would remove about A$0.66/share from current valuation, but RBS Research had
been factoring in extremely conservative LNG pricing for any future volumes signed up. If anything, RBS Research’s
A$2.65/share valuation for GLNG may need to increase slightly (pre 15% sell-down).
Source: IRESS
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