Market Views 20 December 2011

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Juice

Flows

Interesting points to note from BNY's data last night. Net selling of Asian equities after the death of Kim Jong Il
Comment: This can mean 1) Profit-taking to close the books for the year, 2) flight to safety as tensions and risk may rise after the passing of the North Korean leader

Yet another interesting point on the flow front is selling of Italian and Spanish debt in the past 2 trading sessions. Data shows that the selling is 3 standard deviations from the normal for Spain and about 2.5 standard deviations for Italy.
Comment: Anything away from the normal average is abnormal. Anything above 2 standard deviations away is statistically very abnormal. Something very wrong is happening at the moment which may also account for the fall of the EURO under 1.3000 yesterday and staying there

Property

GLP (MC0) and China Investment Corp (CIC) are buying 15 logistic properties in Japan for US$1.6b, expecting demand for warehousing to be strong after the earthquake moving forward
Comment: CIC's first foray into logistic properties in Japan. GLP already has a foothold, making them a viable partner. This is familiar ground for GLP and it is expected to do well. Again, risks here involve the well-being of the Japanese economy in general as well. A stronger yen will also be beneficial

Coal

China's Yanzhou Coal Mining Co. (1171.HK) is in preliminary discussions with Gloucester Coal Ltd. (GCL.AU) to create a coal giant worth up to US$7.9b by merging their Australian assets, according to 3 people familiar with the matter.
Comment: Noble (N21) owns a 64.5% stake in Gloucester coal, which has a market capitalisation of US$1.4b. Such a deal may be beneficial to Noble if Yanzhou pays a premium for Gloucester. Do note that CIC owns a 14.5% stake in Noble


Sources: Bloomberg, Reuters, WSJ, The Business Times, Analyst Reports, Company Announcements