Global equities continue to weaken

USA

Last week, the U.S. market continued to head south. Concern of rising tension between the U.S. and Iraq shook consumer and business confidence. The market was further weakened by negative news, such as Warren Buffett's comment about high stock valuation, and February manufacturing expanded by the slowest pace in three months.

Personal spending dropped 0.1% in January. General Motors Corp said February domestic vehicle sales dropped 19% yoy, and plans to cut North American vehicle production in the second quarter. Intel also revised down its first quarter earnings projection due to weak computer demand.

According to First Call, average earnings of the S&P500
constituents are expected to rise 8.10% in 1Q2003. Some
analysts believe that the current weak economy is due to
excess labor and production capacity, rather than the Iraq
war.

This view is being shared by the Chairman of General
Electric and Chairman of Baxter International (world's
biggest blood-treatment maker), and they reckon that the pace of recovery would be slow. So far, sales of duct tape,
plastics, and other hardware goods were strong, as Americans prepare for possible terrorist attack.

Technically, the Dow is expected to trade between 7550 to 7900 ahead of FOMC meeting on March 18. Investors anticipate the market to rally once the war starts.

Europe

The ECB lowered interest rate to 2.5%, hoping to improve
consumer and business confidence across Europe. The strong Euro against the dollar is hurting exporters. Analysts estimate that for every 10% depreciation in the dollar would on average lower earnings of European companies by 4%.

February car sales in Europe were down 4.0%, according to Peugeot Citroen. The European Central Bank forecasts
average 2003 GDP growth for the Euro zone to be between
1.1-2.1 percent.

In France, February consumer confidence dropped to its
lowest level in six years and unemployment rose to its 2-½
year high. Consumer sentiment was adversely affected by
government's intention to lengthen the pension contribution period owing to the ageing population. The government is expected to decrease expenditure or to increase tax revenue
so as to lower the deficit, from 3.04% to below 3.0% of GDP.

The German market is suffering from weak export growth,
high budget deficit (3.6% of GDP), and high unemployment rate of 10.5%. The government is under pressure to stimulate growth and employment. Social welfare benefit could be cut to encourage job search and to reduce government expenditure. Plans to eliminate 40 tax concessions and to balance the public deficit by 2004 are also underway.

In U.K., drug and insurance stocks pushed the market lower. Analysts have downgraded GlaxoSmithKline, after it lost a U.S. court ruling on a patent for its antidepressant drug, Paxil.

Investors have been selling insurers such as Friends Provident and Britannic Group because of their lower dividend payout. Prudential came under selling pressure after being fined by Britain's financial regulator for selling unsuitable insurance policies to finance their mortgage repayment.

Japan

The N225 is expected to consolidate around the 8000 level
and it could be the near-term trough. Risk of slipping back
into recession seems slim, due to the low inventory level,
strong Asian export, and robust passenger car sales.
The government cut dividend tax on stocks that have been held for over a year to 10%, and reduce capital-gains tax to a similar level.

The Budget Committee of Parliament Lower House approved the Yen81.8 trillion budget for FY2004, which was 0.7% higher than a year ago. Included in this is Yen47.59 trillion in discretionary general expenditure.

Japan's Economic and Fiscal Policy Minister hinted that if the economy weakens further, it may consider launching a new budget package to stimulate the economy. Regardless of the pessimistic market sentiment, expenditure of Japanese companies rose by 3.9% in the fourth quarter.