News

On 01 July 2009, Aluminum Corporation of China (NYSE:ACH) announced that it plans to issue 1 bn RMBdenominated A-shares, raising up to RMB10 bn (US$1.5 bn) through a private placement to institutional investors. Meanwhile, on 02 July 2009, Chalco confirmed that it has taken up US$1.5 bn in Rio Tinto rights, maintaining its 9% stake. However, our fundamental outlook for the company remains unchanged. Therefore, at current levels, we maintain our 6-12 month SELL rating. We will reassess our common stock rating in our next full update report. The Hong Kong dollar is currently pegged to the US dollar. Therefore, no currency impact is expected over the coming 6-12 months. In line with our fundamental outlook, we maintain our SELL rating. We will reassess our ADR (1 ADR = 25 common shares) rating in our next full update report.

Nomura Holdings Inc. (NYSE:NMR) has announced an agreement to acquire NikkoCiti Trust and Banking Corporation through its wholly-owned subsidiary Nomura Trust and Banking Corporation for ¥19 bn. In our opinion, the company will benefit from this deal over the long term, as it will significantly increase the company’s trust asset market share in Japan. Consequently, we upgrade the common stock from a SELL to a HOLD. We will reassess our common stock rating in our next update report. We continue to expect to revert to a 6-24 investment horizon in our next update report as we now anticipate a significant negative currency impact on the ADR over the medium-to-long term. Therefore, we reiterate our SELL rating. We will reassess our ADR (1 ADR = 1 common share) rating in our next update report.

Media reports are suggesting that Royal Bank of Scotland Group PLC (NYSE:RBS) is in talks to sell its Asian operations to Standard Chartered and Australia and New Zealand Banking Group (ANZ). This deal is expected to fetch approximately US$1 bn-US$1.5 bn, reinforcing the bank's liquidity position. However, we expect the company to report further writedowns over our investment horizon. Considering this, we maintain our 6-12 month SELL rating, even though the target price derived in our last update report does not support a SELL. We will reassess our common stock rating in our next update report. We expect to revert to a 6-24 month investment horizon in our next update report as we now anticipate a significant positive currency impact on the ADR over the medium-to-long term. Consequently, we upgrade the ADR from a SELL to a HOLD. We will reassess our ADR (1 ADR = 20 common shares) rating in out next update report.

The Carnival PLC (NYSE:CUK) ADR hit our target price on 01 July 2009, supported by positive investor reaction to the company's healthy fundamentals, which were discussed in our previous update report, as well as a broad-based rally in equity markets around the world. However, at current levels, we feel the stock's medium-to-long term upside potential has been exhausted. Therefore, we downgrade the ADR from a BUY to a HOLD. We will reassess our ADR rating in our next full update report. We continue to anticipate a significant negative currency impact on the UK stock over the coming 6- 24 months. Therefore, we downgrade the UK stock from a HOLD to a SELL. We will reassess our UK stock rating in our next full update report.

New Valuations

Harmony Gold Mining Company Limited (NYSE:HMY) Over our investment horizon we expect spot gold prices to improve from current levels. However, we also expect the rand to appreciate strongly against the US dollar, which will lead to a fall in the company’s rand gold price realizations in 4Q 09 and FY 2010. Furthermore, although we expect the dollar to recover against the rand in FY 2011, US dollar-denominated gold prices are expected to decline, leading to a further y-o-y fall in rand gold price realizations. Nevertheless, we anticipate growth in production volumes during FY 2011, which should support revenues. Coupled with a fall in per-unit cash costs, we expect volume growth to reinforce margins during FY 2011. There should be a positive trend over the longer term as well, considering the company’s forecast for growth in gold production to 2.2 mn oz by FY 2012. Moreover, the company is debt-free, and we therefore remain optimistic about its financial position. On balance, taking a 6-12 month investment horizon, we believe the company is fairly valued at current levels.

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