Major stock markets remained volatile and moved sideways. Investors remained prudent as corporate earnings outlook remain uncertain. Resurging acts of violence in the Middle-East and in India also acted as a drag on equities. The Bombay stock market slid by more than 4% following the bombs blasts on Monday. The Indian Rupee also weakened against major currencies. For the week ending Monday 25th August 2003, the widely-followed Morgan Stanley world equity index dipped by 0.2%.

On the economic front, latest reports indicated continued strength for the US economy, which saw new construction rising for the third consecutive month in July. Moreover, the US Conference Board?s index of leading economic indicators rose by 0.4% in July, its fourth consecutive increase. Another positive trend was the decline weekly job claims, which slipped to a lower-than-expected 386,000 level at its latest reading. These encouraging data prompted US-based Wal-Mart Stores, the world?s largest retailer, to raise its sales forecast for the month of August. However, its shares remained flat for the week.

Growth prospects for Asian countries

A recent report from US brokerage house Merrill Lynch raised doubt about the strength of corporate earnings for the second half of 2003. The report indicated that Corporate America has yet to work off the excesses of the late 1990s. This is regarded as a main threat to an early recovery capital spending, which is essential for job creation and a sustainable economic growth. The US Dow Jones Industrial Average Index eased by 1.0% while the American technology stocks strengthened further, helped by positive comments by chip-maker Intel. The company expects strong sales for the current quarter, which is to be driven mostly by US consumers and buyers in Asia. Last week, Intel rose by 4.0% versus Nasdaq?s 1.4% jump.

There are growing hopes for a synchronous global economic recovery following positive readings from Europe and Japan. The recent weakness of the Euro vis-à-vis the US dollar and a rebound in business optimism in Germany provided a case for a revival of the Eurozone economy. However, the German and French bourses ended the week slightly lower, down by 0.2% and 0.3% respectively. The Swiss stock market inched higher (+0.1%).

Asian equity markets reacted positively as they rallied to fresh one-year high amid generally positive economic news. Investors remain upbeat about the growth prospect for Japan and Asian countries. Morgan Stanley upgraded Japan?s growth rate for year 2003 from1.2% to 2.0% p.a. Japanese and South Korean stocks gained 2.4% and 2.2% respectively, helped by the advance of export-oriented companies. Sony jumped by 3.1% while Samsung Electronics jumped to an all-time high during the week. In Hong Kong, a jump in property prices pushed Hang Seng Index up by 2.3% for the week.

Contribution by Confident Asset Management