This material has been produced by RBS sales and trading staff and should not be considered independent.

The Round Up
10 December 2009
Issue No. 236
The Round Up is a comprehensive daily note produced by the RBS Warrants
team providing an overview of market movements along with quality ideas for
warrant traders and investors.

In today’s issue
Global Market Action Scoreboard, commentary
Aussie Market Action SPI Comment, Events & Dividends
NWS (NWSKZJ) MINI Trading Buy USD rebound, more value in TV
QAN (QANKZK) MINI Trading Buy – Strong load factors
ASX (ASXKZI) MINI Trading Buy – Strong November trading
Round Up Corner Banks Update – ANZ,CBA,NAB,WBC

Equities

Move Last % Move Range Volume

ASX 200 -32.7 4637.9 -0.7% -33 to -33.u.c $0.0 bn(L)

SPI - yesterday -39.0 4630.0 -0.8% -74 to -26.u.c 24,121(L)
Dow Jones +51.1 10337.1 +0.5% -50 to +56 Avg
S&P 500 +4.0 1096.0 +0.4% -6 to +5 Avg
Nasdaq +10.7 2183.7 +0.5% -17 to +13 Avg
FTSE -19.2 5203.9 -0.4% -47 to +23 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot -1.84 70.78 -2.5% -10.9%
Gold Spot +1.70 1130.10 +0.2% +2.4%
Nickel (LME) +19.05 747.85 +2.6% -5.0%
Aluminium (LME) +2.18 98.69 +2.3% +13.4%
Copper (LME) -1.43 313.23 -0.5% +6.0%
Zinc (LME) -0.69 103.34 -0.7% +6.8%
Silver -0.15 17.43 -0.9% -0.9%
Sugar -0.07 21.58 -0.3% -1.0%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus

NWS (US) +0.03 +0.2% 14.60 16.06 -10.4 c
RIO (UK) +53.0 p +1.7% £31.40 56.17 -1472.9 c
BLT (BHP UK) -6.0 p -0.3% £18.505 33.10 -744.6 c
BXB (UK) -1.5 p -0.4% £3.435 6.14 -12.5 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus

BHP (US) +0.76 +1.0% 73.46 40.39 -15.6 c
AWC (US) +0.08 +1.4% 5.67 1.56 +0.9 c
TLS (US) +0.28 +1.8% 15.63 3.44 -1.2 c
ANZ (US) -0.06 -0.3% 19.64 21.60 +8.9 c
WBC (US) +0.60 +0.6% 106.95 23.52 -6.6 c
NAB (US) +0.45 +1.8% 25.40 27.93 -2.6 c
LGL (US) +0.10 +0.3% 29.90 3.29 +0.8 c
RMD (US) +0.52 +1.0% 52.00 5.72 -4.1 c
JHX (US) -0.27 -0.7% 36.78 8.09 -14.1 c
PDN (CAN) -0.10 -2.6% 3.81 3.97 -7.6 c

Overnight Commentary
United States Commentary
Another reasonably uneventful session, the glass still looks half full, but in the absence of any catalyst and with year-end
upon us, conviction is low. Heading into the bell, the Dow is trading at session highs up 43pts thanks in no small part to
3M, the S&P up 0.3% and the Nasdaq 0.4% higher.
Manufacturing - 3M a clear standout on the Dow, trading nearly 3% higher and for the minute, accounting for more than
50% of the days gains care of a broker upgrade. Moving from a HOLD to BUY, the analyst in question is predicting best in
class growth and "superior financials return" over the next 9-12months.
Eco - Wholesale Inventories +0.3% vs -0.5% expected. Just the one data point overnight ahead of a glut to close the
week out. Due tomorrow and Friday, Weekly Jobs data, Retail Sales, UoM of Confidence and Business Inventories.
Steel - On an otherwise unexciting night for the cyclicals, steel stocks were the highlight. AK Steel up over 4% and
among the S&P500's top performers after mgmt said they will boost prices for their carbon steel products by $30/T. US
Steel came along for the ride, also trading 4% higher.

United Kingdom & Europe Commentary

The FTSE fell 0.4% or 19pts as negative news from the UK pre-budget report hurt while the Greek news still weighed and
a downgrade for Spain from S&P also hit sentiment. The FTSE Eurofirst was off 1% while the DAX and CAC were both off
0.7%.

Euro Banks - Further Greek woes and a downgrade by S&P to Spain's outlook saw the sector weaker again. While Spain
has 2 years before the potential downgrade the news hit the banks. Banco Populare sank 3.8% with Banco Santander off
3.7%. Deutsche Bank dropped 1.7%, Commerzbank fell 2.3%, BNP was off 0.3% and SocGen sank 0.7%.

UK Banks - Positive comments from Standard Chartered helped but news of a tax on bankers' bonuses and the Greek
and Spanish concerns saw the sector mixed. Barclays fell 3.3% and RBS was off 0.4% but Lloyds, up 1.7%, stayed in
demand ahead of the deadline for its £13.5bn rights issue on Friday and Standard Chartered also climbed 1.7% after
downplaying its exposure to Dubai.

Insurance - A ratings downgrade to Fortis, thanks to large exposure to Greece, saw the sector off. Fortis slumped 7.8%,
Zurich Financial dropped 2% and Axa fell 4%. In the UK Old Mutual was the worst on the FTSE100 off 5.6%, L&G
dropped 2.9% and Resolution ended 3.2% lower.
Commodites Commentary
Miners - Despite a stronger US dollar metals had a good night helping the miners. Rio was up 1.7%, Xstrata was the
second best on the FTSE up 1.9% while Randgold added 0.9%.

Energy - Oil prices hit 2 month lows as US govt data showed demand continued to fall. The crude price fall occurred after
London close though with the commodity flat for most of the session. BP was off 0.8% but Shell added 0.3% with Statoil
off 1.1%, Repsol down 0.8% while Total ended 0.4% lower.

SPI Commentary
The SPI traded down 40pts or 0.8% to 4630. Open at 4670 with a high of 4686 and a low of 4595. Volume 25,958. Overnight the SPI
traded up 1 to 4633.

SPI Intraday SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week

Monday AUS Aus ANZ job ads

US
Tuesday AUS Aus NAB business confidence, Aus current account balance
US US consumer credit
Wednesday AUS Aus trade balance, Aus housing finance
US
Thursday AUS Aus unemployment rate
US US wholesale inventories
NZ NZ RBNZ cash rate decision
Friday AUS
US US trade balance, US retail sales
*Dates are indicative only and may change
MINI Trading Buy:

News Corp (NWSKZJ) – USD rebound, more value in TV

NWS share price has bounced a dollar this week from low $15 to last closing price of $16.14. NWS remains a key RBS
Research conviction buy and believe it could break this trading range on it’s 3rd attempt on market upgrades to earnings.
NWS has been weighted down on the falling USD index of late. The stock was well supported at this level and with a
stabilising/rising USD, NWS could break strongly from this level. RBS Research believes that the introduction of
retransmission fees will add a substantial uplift to the TV revenues and valuation. RBS Research has a $19.92 Target
Price on NWS which represents a healthy 31.4% upside. Get Long NWS with NWSKZJ.

Source: IRESS

Retransmission fees could be a share-price catalyst

News Corp has indicated that it intends to try to start charging the cable, satellite and IPTV operators for the right to
retransmit the Fox Network to their pay TV customers. We estimate potential additional revenue and operating profit for
News Corp of US$500m+ over a threeto four-year time-frame, which could help drive News Corp’s TV operating profit
back up to US$1bn by FY14F (from only US$174m in FY09). etransmission revenues will take time to ramp up as
agreements come up for renewal, but the announcement of an initial deal could be a catalyst for an overall re-assessment
of the valuation of News Corp’s TV assets.

Retransmission fees could add US$3.2bn+ to TV valuation

We currently value News Corp’s TV operations at US$3.8bn (8.5x FY11F EBITDA). We estimate that retransmission
revenues of cUS$500m per annum would add US$3.2bn to our TV DCF valuation (equivalent to US$1.25 or A$1.40 per
share), with further upside if News Corp is able to achieve a rate per subscriber above that of CBS.

Buy rating and A$19.92 price target retained

We believe guidance for FY10 operating profit growth of ‘high single to low double digit’ is conservative and see potential
for ongoing upgrades as the year progresses (we forecast growth of 16%). The stock looks cheap on both peer multiple
and a sum-of-the-parts basis, with possible catalysts around retransmission deals and eventual capital management.

RBS MINIs over UGL

Security ExPrc Stop Loss CP ConvFac Delta Description

NWSKZJ 1157.22 1272 Long 1 1 MINI Long
NWSKZI 783.16 861 Long 1 1 MINI Long
MINI Trading Buy:

Qantas (QANKZK) – Strong load factors

QAN's October operating statistics highlight strong load factors and a further moderation in yield declines. With price
increases appearing sticky for Domestic and less discounting on offer for International flights, we expect further yield
improvement (and hence earnings growth) over coming months. Buy maintained.

Buy new MINI QANKZK

Source: IRESS

Load factors show further strengthening…

October group load factor increased 3.4ppt to 83.3%, driven by stronger demand and ongoing capacity management.
Jetstar Domestic continues to perform well, recording both capacity and load factor growth in the period (+1.0% and
+1.9ppts respectively) while effective capacity management (ASKs -4.6%) drove a 2.7ppt increase in loads (to 85.0%) for
Qantas. International operations also saw solid load factor growth. Qantas’s load factor grew 5.4ppt on the back of a
sharp 11.5% decrease in capacity, while Jetstar continues to grow with ASKs up 45.5% and load factor up 2.0ppt (to
76.6%). With load factors at or near record levels for both sets of operations, and economic conditions recovering (while
capacity still remains constrained), we expect similarly strong figures over coming months.

Strong loads to lead earnings recovery; Buy maintained

Load factor improvement generally leads yield recovery. With loads now strong, we expect yield improvement to drive
earnings recovery and, hence, share price performance over the next 12 months. With QAN now trading at 1.1x P/NTA
(vs 1.3x historical average), RBS Research maintain a Buy recommendation in the belief that QAN presents solid value to
investors.

RBS MINIs over QAN

Security ExPrc Stop Loss CP ConvFac Delta Description

QANKZK 200 220 Long 1 1 MINI Long
MINI Trading Buy:

Aust Securities Exchange (ASXKZI) – Strong November trading

RBS Research have a Buy recommendation on ASX with a 12mth Target Price of $40. Yesterday ASX released
November trading activity showing a surprisingly strong rebound to trading volumes in cash and deriviative
products. Cash equity volumes were in line with RBS Research’s forecast at 541k/day (up 31% on the pcp), while
futures & options volumes were up a sizeable 47% on an average daily basis. Furthermore, both primary and
secondary issuances remained healthy.

Get long ASX with ASXKZI for a valuation uplift to Target Price of $40.

Source: IRESS

Cash equities – value traded up 19% on the pcp at A$5.1bn

Total average daily volume traded was 541k in November, up 31% on the pcp. The daily average value traded was up
19% on the pcp to A$5.1bn (although this is down on the A$5.4bn in October). Overall we view these as strong numbers
and remain confident that our forecast of A$6.0bn in average value traded for FY10 remains intact.

Futures & options – November volumes up 47% on the pcp

November was an exceptionally strong month for futures & options with average daily volumes up 47% on the pcp.
Management attributed this strength to strong trading in 3-year treasury bond futures, as the contract has become the
focal point of liquidity across the yield curve. The uncertainty around future cash rates contributed to the volumes, as did
the high level of Commonwealth Government bond issuance (A$4.8bn).

ASX last traded $33.33, BUY ASXKZI for 1-for-1 upside towards RBS Target Price of $40.00

RBS SFIs over ASX

Security ExPrc Stop Loss CP ConvFac Delta Description

ASXKZI 2101.11 2415 Call 1 1 MINI Long
RBS Round Up Corner:

Banks Sector Update – ANZ,CBA,NAB,WBC

Post the bank reporting season, CBA trading update and ANZ, NAB and WBC going ex dividend, the banks have
underperformed. RBS Research believe banks will wait until they understand how businesses are performing post
Christmas before poviding further upbeat commentary. This is likely to weigh on relative share price performance in the
short term, however the BDD cycle seems to be peaking and any pullbacks in the banks into the end of the year should
be used as a buying opportunity.

Sector performance
Banks' PE relative (to All Ords) is back down to 86%, having underperformed the market over the last month. While this is
above the long-run average, given short-term structural advantages, we believe the sector can trade at a premium. The
banks are now trading at an average PE of 13.5x FY10F on IBES consensus.

Investment view – RBS Research prefer ANZ and NAB to WBC and CBA
As a result of a normalising earnings cycle, we believe relative valuation will again play a significant role in the relative
performance of stocks in the sector. RBS believe ANZ and NAB still have the greater share price upside potential over
the next six to 12 months, given their 1-2 PE point discounts.
For further information please do not hesitate to contact us on the details below

Contact
Equities Structured Products & Warrants
Toll free 1800 450 005 www.rbs.com.au/warrants
Trading Products Team
Ben Smoker 02 8259 2085 ben.smoker@rbs.com
Ryan Corrigan 02 8259 2425 ryan.corrigan@rbs.com
Investment Products Team
Elizabeth Tian 02 8259 2017 elizabeth.tian@rbs.com
Tania Smyth 02 8259 2023 tania.smyth@rbs.com
Robert Deutsch 02 8259 2065 robert.deutsch@rbs.com
Mark Tisdell 02 8259 6951 mark.tisdell@rbs.com

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Explanation of Warrant Tables:

Security – refers to the code ascribed to the warrant, ExDate – refers to the date on which the warrant expires or is reset, ExPrc – refers to the
exercise price, or second instalment payment, CP – tells you whether the warrant is a call or a put, ConvFac – the conversion factor of the warrant
which tells you how many warrants you need to exercise in order to take possession of 1 share, Delta – tells you how much the warrant will move for a
1c move in the underlying security, Description – Tells you the type of warrant.
All charts taken from IRESS unless indicated otherwise