Equities continue to slide

USA

US equities experienced a roller-coaster week. Earlier last
week, the market reacted negatively on concerns that Iraq did not intend to destroy the Al Samoud missiles as demanded by the United Nations.

Moreover, UN chief weapons inspector Hans Blix reportedly expressed that Iraq "could do more" to cooperate with inspectors but "even if Iraq would cooperate immediately, actively and unconditionally with us, we would need several months". Separately, Hewlett-Packard, the world's second largest PC maker, reported weaker than expected revenue, which also weighed down the market.

Most of the good news arrived towards the end of last week. The U.S. Commerce Department revised up 4Q02 GDP growth from 0.7% to 1.4%, as consumer and business
spending was higher than originally expected. Durable goods orders also surged 3.3% in January, outpacing forecasts of a 2% growth.

On consumer sentiment, the University of Michigan consumer sentiment index reached 79.9, surpassing economists' expectations of 79.1. Separately, a major brokerage upgraded Intel's 1Q03 earnings forecast, injecting a positive tone for computer-related stocks.

Europe

Newsflow for Europe was mixed last week. On the positive
front Ernst Welteke, head of German Bundesbank and ECB council member, expressed that "eurozone inflation in 2003 would moderate, falling below the bank's 2% threshold and making room for monetary policy measures".

Negative newsflow include supermarket operator, Ahold, stating that its 2001 and 2002 earnings were inflated. Fortis' share price was also dragged down by this news, as Fortis holds more than 5% of Ahold's equity.

Separately, Prudential, UK's second largest insurance company, announced plan to abandon its pledge to raise dividend in the coming years.

Japan

The Bank of Japan appointed Mr. Toshihiko Fukui as its new governor. The market does not expect this new appointment to spark any drastic change in Japan's monetary policies.

Economists expect this new governor will work closely with the Japanese government in addressing policies to reflate the long struggled economy.

The fall in Japanese export-led companies such as Sony,
Matsushita and Toyota spearheaded the drop in the Nikkei
index as the Japanese yen strengthened. Bank stocks also
contributed to the fall, as Sumitomo Mitsui Financial Group announced that it increased the sale of preferred shares by 15% to 345 billion yen.

Moreover, Mizuho Holdings (largest Japanese bank by assets) lost 7.9% last week, as the bank plans to sell preferred shares to overseas investors.