Sector Idea : Short Hong Kong Developers The market has yet to recognise that Hong Kong developers are in the midst of a very painful and very lengthy transition. They are still seen purely as cyclical animals as opposed to beasts whose fundamental nature must change Their business has to change from having high margins and low volumes in land-scarce Hong Kong to having lower margins and high volumes in land- plentiful China. This is at least a 5-10 year process during which overpriced landbanks in Hong Kong have to be run down before the benefits of expansion from China drive the full recovery. This is a structural issue that the market has ignored and hence mispriced. The recent rise, bordering on euphoria, in Hong Kong developer stocks is setting up a very promising opportunity to take profits or to short. The seductive twin arguments of falling US interest rates and more friendly government policies have seen developers like Sun Hung Kai Properties and Henderson Land approach their former price highs - long before we have had market clearing and let all the air out of the near 30 year-old asset bubble -34.7% -28.9% 8 March Hong Kong Developers Sell

Market Idea : Thailand About To Come Right '7-Year Bear Market Ending' '5-Year Bull Market Ahead' 'Solid Positives Ignored' Misconceptions - Economy Stalling - Reform - Earnings - Market and Value - Politics Thailand's Strengths Dollar Adjusted Indices SET STI Hang Seng Source: Reuters September 2000

Big Idea : Overweight Southeast Asia Overweight Southeast Asia - we are not joking - for its relatively defensive qualities until the US recovery is in sight. Domestic resilience, supported by recovering natural resource-based incomes and by much higher local content in Southeast Asian exports, is likely to see the region in the second half again outperform Northeast Asia. 16 Aug 01 End 01 % Chg Below High End 02 % Chg Below High End 03 % Chg Below High Thailand (59.0) (46.0) (35.2) Philippines1,3251, (57.9) 1, (50.7) 1, (44.9) Indonesia (35.2) (25.8) (19.0) Malaysia (37.1) (29.2) (29.2) Source: Research-Works estimates Index Targets: Aug Overweight SE Asia

Why Overweight Southeast Asia? : Defensive Political events are giving Southeast Asians a sense that after four very difficult years they have a second chance to recover from the Asian Crisis and its after effects. Big Idea : Overweight Southeast Asia -Seek relative safety of exporters with higher local content : natural resource-rich SE Asian economies -SE Asia's commodities with +90% local content show signs of ending year declines : palm oil up 50%, coconut oil up 30% : major income sources in Malaysia, Indonesia, Philippines. -Tourism a consistent hard dollar earner, beneficiary of improving social stability 2 Aug Overweight SE Asia Indonesia Thailand Malaysia Philippines Korea Taiwan % of Exports Natural Resources * Getting Exports In Perspective % of Exports * * Adjusted for local content and value-added in exports Singapore Indonesia Thailand Malaysia Philippines Singapore Korea Taiwan % of Exports Natural Resources * * Adjusted for local content and value-added in exports

Big Idea : China The most important long term decision that fund managers can make this year is to spend much more time getting to know China. Not only is it nearly 30% of regional market cap but 13 China Mega Trends will support some of Asia's best performance. Investors' perceptions lag reality or are fogged by out-dated experience. No longer can China be ignored. -Private Sector Dominance: overtakes state in Private Property: critical to private sector-led economy -Housing Reform: creates instant wealth Mortgage Market Developing: 20% of urban new loans -Consumerism Taking Off: $500 bn market larger than Korea, Taiwan, Hong Kong and Singapore combined -New Mindsets: post Cultural Revolution generation -End of Deflation: investment, consumption boosted -More Taiwans: Taiwan companies pouring capital and people into Mainland at an accelerating rate Mega Trends will change China beyond recognition: 15 May China – The Most Important Decision E Private Sector State Enterprises Historic Moment In 2002 TVE % Share of Industrial Output 50 First Time Since 1949… Research-Works Forecast Source: 2000 China Statistical Yearbook

Macro Idea : Asian Currencies The recent weakness of Asian currencies, with everything in thrall to the strong US dollar, strikes us as a misconception about what lies ahead over the rest of 2001 Don't assume strong US dollar is permanent US imbalances unlikely to be ignored forever Only 20-30% US dollar fall can rebalance trade China could surprise: more flexibility, appreciation 19 April Asian Currencies Dollar Weakness Ahead Broad Dollar Index