Global equities rose for a fifth consecutive month after a better than expected second quarter results season, and as macro indicators generally surprised on the upside. Over the month the MSCI $ World Index rose 2% with Japan easily the best performing major region with a gain of 10.5% in US $ terms. The UK was the worst performer for a second month with a fall of 1.4% as its heavy concentration of defensive stocks weighed on the market. Against this backdrop, the ABSA International Fund underperformed its benchmark, the Rand adjusted MSCI World Index, with a fall of 0.2% versus a 1.0% gain. Macro indicators generally surprised on the upside in August, especially in the US. Consumers also gained confidence in August, a sign they might increase spending and help accelerate the economic recovery. However, on a more downbeat note, the employment situation in the US remained weak. On the monetary front, the Bank of England decided to leave interest rates on hold at 3.5%, on the back of strong data on consumer borrowing and retail sales. The Federal Reserve of America left its benchmark interest rate unchanged at a 45-year low of 1% and policy makers said they may leave it at that level ``for a considerable period'' to boost growth. The ECB also left interest rates for the euro-zone unchanged at 2%. Strong regional manufacturing numbers, better-than- expected GDP growth in the second quarter, and evidence that the labour market may finally be turning the corner ensured US equity markets enjoyed another month of gains. The MSCI US Index rose 1.7% in August with Dow Jones Industrial Average and the S&P 500 Composite Index scoring their sixth consecutive monthly gains, a feat that has not been achieved in eight years. Financial and defensive stocks underperformed the market however. Fannie Mae, which specialises in the US mortgage market, continued to suffer from the rise in bond yields. In Europe, cyclical outperformance continued in August; Electronics, IT Hardware, Household Goods, Mining and Autos were the top performing sectors while financials were the greatest casualty of higher bond yields; Banks and Insurance were the worst performing sectors in Europe. Japan was easily the best performing major region over the month with a gain of 10.5% in US $ terms, but part of this gain was currency related with the yen climbing 3.2% versus the US dollar over the period

Global equity markets enjoyed a third consecutive month of gains, but the strong gains seen in April and May tailed off as investors became more cautious ahead of the quarter-end. Over the month the MSCI $ World Index rose 1.6% with Japan best performing region with a gain of 7.3% in US $ terms. The UK and Europe were the joint worst performers, with both regions gaining 0.7% in US $ terms. Against this backdrop, the Absa International fund outperformed its benchmark, the rand adjusted MSCI World Index, with a return of -4.1% versus -4.7%.

Investor expectations of interest rate cuts in the US and Europe were satisfied over the month with both the European Central Bank (ECB) and the US Federal Reserve taking action in their respective regions. The ECB was the first bank to act with a 50 basis point cut taking euro-zone interest rates down to 2.0%, their lowest level in it's history. The recent strength of the euro, which has been adversely affecting European exporters, was seen to be one of the key factors behind the move. On the same day, however, the Bank of England decided to keep UK interest rates on hold at 3.75%.

It was a mixed month for economic data releases in the US. Consumer confidence rose strongly in May on hopes the economy would eventually recover, and US service-sector grew rapidly last month according to the Institute for Supply Management.

The markets have been surprisingly resilient despite the rather mixed economic signals from the major markets. In our view this is partly due to some unwinding of the flight to quality seen last year and in the run up to the Gulf War. Both private and institutional investors have been allocating cash to the equity market and more importantly would appear to be buyers on any weakness. Equity markets have in the past been accurate forecasters of the direction of the underlying economy and we think this could prove to be the case again, though we would prefer a greater degree of certainty before increasing the equity weighting in the Absa International Fund. As such, we are retaining a neutral stance for the fund.

Global equity markets rallied strongly in April with investor sentiment boosted by the ease with which US-led coalition forces concluded the war in Iraq. The rally provided some welcome relief from the gloom experienced during the first quarter of the year and ensured that the MSCI $ World Index is now in positive territory year-to-date. It was the first positive monthly return in the Index since last November and was the best monthly performance since October 1998 when markets were recovering from the LTCM hedge fund crisis. However, the upbeat mood was slightly dampened by the continuing spread of the severe acute respiratory syndrome (SARS) virus, which led to some caution in the financial markets, especially in the Far East from where the virus appears to have originated. Against this backdrop, the Absa International fund underperformed its benchmark, the rand adjusted MSCI World Index, by 4.0% over the month.

Economic data released during the month sent conflicting signals to the market. In the US, retail sales and consumer confidence data remained surprisingly strong, while manufacturing data was exceptionally weak.

The economic picture in continental Europe was broadly similar with no bounce in manufacturing confidence following the easing of hostilities in Iraq, and consumer confidence picking up only very slightly as concerns over unemployment levels grow. Initially, the conflict in Iraq had a negative impact on the equity markets as stiffer than expected resistance from Iraqi combatants forced investors to consider the possibility of a more protracted and bloody conflict than the coalition forces had originally envisaged. However, this early resistance soon crumbled and the war was all but concluded by 9 th April following the dramatic collapse of Iraqi defences in Baghdad. The positive news from Iraq was then bolstered by a positive start to the first quarter earnings season in the US. More than two-thirds of the S&P500 companies have already reported and, for those that have reported so far, the total earnings reported are approximately 7% above final estimates.

On the downside, Japan remained the laggard in the global equity markets for a second month. Equities got off to a weak start as the Bank of Japan's Tankan survey showed that business sentiment among large manufacturers worsened slightly in the three months to March. It was feared that a prolonged war in Iraq could undermine Japan's nascent economic recovery, which has been also solely dependent of export-led growth, particularly to the US.

Turning to the Absa International Fund's three main drivers for equities, our longer term positive stance towards the asset class remains in place. Interest rates are very supportive, providing a huge monetary boost to the economy and valuation support for equity prices. Profits are continuing to progress (up around 11% during Q1 in the US), though we clearly need to see a better economic picture to provide a more visible and sustainable trend for the medium term. Finally, we see sentiment gradually improving and volatility of prices easing back from the very high levels seen in recent months.

Global equity markets remained weak during February as a combination of renewed fears of war with Iraq, poor earnings results on both sides of the Atlantic, and a resurgence of accounting concerns all undermined fragile investor confidence.

Over the month the MSCI $ World Index fell 1.9% with Continental Europe the worst performing region with a fall of 4.3% in US $ terms, while Japan was the best performer with a rise of 0.6% in US $ terms. Against this unsettled backdrop, the Absa International Fund fell 7.4% versus a loss of 6.7% for its benchmark, the rand adjusted MSCI $ World Index.

On the economic front, US economic data remained mixed, but the balance of positive news to negative news appeared to become more favourable for the economic bulls. On the plus side, US consumer spending surged in December at the fastest pace since July and, in a possible sign that the US manufacturing sector might be turning around.

In the UK, the Bank of England surprised markets when it cut interest rates by 25 basis points to 3.75%, the lowest level since 1955, on concerns about the UK's growth prospects.

Looking ahead, we continue to adopt a conservative approach in our asset allocation, striking a balance between minimising further downside risks and being positioned to take advantage of market rallies.

Global equity markets started 2003 on a weak note as the threat of war with Iraq overshadowed all other developments during the month. President George W. Bush's uncompromising tone in his State of the Union address panicked investors into fearing war is now inevitable and over the month the MSCI $ World Index fell 3.1%. The UK was the worst performing region with a fall of 7.1% in US $ terms, while the MSCI Pacific excluding Japan region was the best performer with a rise of 0.9% in US $ terms. Gold was once again the main gainer over the period, rising 7% as investors were attracted to its 'safe-haven' qualities. Against this backdrop, the ABSA International Fund fell 4.3% versus a loss of 3.3% for its benchmark, the Rand adjusted MSCI $ World Index. Looking ahead, we continue to adopt a conservative approach in our asset allocation, striking a balance between minimising further downside risks and being positioned to take advantage of market rallies.