GLOBAL MARKETS MONITOR Global Markets Division Wednesday, September 12, 2001 International Capital Markets Department

This is an internal document. It is produced by the Global Markets Division (GMD) of the International Capital Markets Department. It reflects GMD staff�s interpretation and analysis of market views and developments. Market views presented may or may not reflect the consensus of all market participants. All data and information are from market sources unless otherwise noted. GMD staff do not independently verify the accuracy of data, statistics or events presented in this document.

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Dow 9,606 (0%) Nikkei 9 ,610 (-6.6%) US 30-Yr. 5 .44% (4 bp) € 0.907 (-0.7%)Nasdaq 1,695 (0%) FT SE 4,882 (2.9%) EMBI+ n.a. n .a. ¥ 119.5 (0%)

Global Markets There do not appear to be any signs of major systemic strains in global financial markets in spite of the spike in asset market volatility seen since the terrorist attack on American civilian and military targets yesterday. While anecdotal evidence so far suggests there may have been some temporary delays in clearing and settlement systems in the US, and the inability of some investor counterparts to meet margin calls with their brokerages, the extraordinary situation appears to have led market participants to use discretion in allowing orderly settlement of positions and few forced liquidations. The Federal Reserve Bank of New York pumped more than $38 bn in reserves into the US banking system, about 10 times size of a regular daily action, to ease fears of a possible banking cash crunch. This is in addition to the $80 bn added to the financial system by the ECB, Swiss National Bank and the Bank of Japan. The US Federal Reserve and the Bank of England have reportedly asked central banks to limit hard currency denominated operations to curb excessive volatility. Heightened risk aversion and volatility set today�s tone for market movements worldwide. There is growing sentiment the attacks will deepen the current economic slowdown and erode consumer confidence. Bank of England governor George said the major economies would have the scope to respond to any economic problems resulting from attacks on the US, but that coordinated interest rate cuts were very unlikely. Spikes in commodity prices are expected to be temporary.

US financial markets were closed again today. The stock exchanges are in consultations with regulators about reopening and will possibly be open tomorrow. Decisions are expected later today. US stocks did not trade in Europe today. The Chicago Board of Trade said its electronic brokerage screens would be up and running this evening. The feared deaths of many traders, especially those trading on the Nasdaq, may also affect trading and liquidity on bourses when they reopen. Bond markets were closed on the recommendation of the Bond Market Association. The trade group would assess the situation �day by day.� The destruction of Cantor Fitzgerald, which trades about a quarter of US government bonds, had reportedly caused some settlement problems yesterday which appear to have been resolved. Dealers were reportedly quoting some prices in London in an appearance of business as usual, but only in an effort to roll over positions through Monday and not to allow new position taking. On the major foreign exchange markets, the euro is stable against the dollar while the yen is 0.7% lower. Trading in London was only half the normal volume. Despite the lack of liquidity, dealers reported they were not having difficulty closing positions on the spot market, but said derivatives were proving difficult to execute as the forward market was extremely thin. ACI, the international financial market association, said payment systems seemed to be working in Europe and the US. European stock markets gained 1-3% today after the injection of liquidity, providing relief to shaken global markets. But trading was thin and investors moved into defensive stocks such as

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pharmaceuticals (up 7%). Oil shares fell back sharply after oil prices dropped. British Telecom jumped 10.8% and Alcatel 9.5% due to an expected increase in both telecom and security services. Airlines and hotels are still down sharply. Insurance stocks swung wildly. Moody�s estimated insurance claims in New York at $10-15 bn. Trading in dollar-denominated emerging market bonds was suspended for the second day in a row for most markets. Some trading by locals in Russian 2030 bonds seems to have occurred, with prices lower, but not substantially so. A handful emerging market bond trades were also reported in London, but while bid/ask prices are quoted, they do not seem to reflect actual trading, but rather a wish to express �business as usual.� European and Asian companies canceled $4.4 bn of equity and bond sales. PLDT postponed an investor meeting in Hong Kong. It had planned to buy back $329 mn of bonds and sell new 10-year bonds for $250 mn.

Latin America Several regional equity markets reopened for trading today, with the notable absence of Argentina and Mexico. Market movements are mostly stable, with some signs of a recovery. At the time of writing, the Brazilian Bovespa had recovered 3.3% of yesterday�s loss. Investors were seen moving back into telecom and in particular oil stocks, such as Petrobras, since the general view is that the stock market overreacted yesterday. Other regional markets were mixed with the Chilean bolsa posting a 1.5% rise, while the Colombian stock index is showing a loss of 1.2%. Trading in the major regional currencies resumed this morning, with most of them showing signs of recovery following yesterday�s sell-off. The Brazilian real, however, went against broader market developments and was trading 0.5% weaker at 2.68 reais per dollar. The central bank announced that it is still

intervening in the foreign exchange markets and that yesterday�s 1.1 bn reais debt auction would instead take place today. Moreover, the central bank stated that it stood ready to provide additional liquidity to any Brazilian commercial bank that may need it. The Mexican peso rebounded strongly and rose 0.8% to 9.44 pesos per dollar, as traders moved rapidly to take advantage of the perceived overreaction yesterday. With most local market participants generally long dollars, it is likely that follow-on peso buying to unload dollars and to bring dollar/peso positions to neutral, would support the peso and trigger a rally as far as to 9.30 pesos per dollar. The Chilean pesos is also recovering and is currently trading 0.9% stronger at 679 pesos per dollar. Argentina With the interbank market open, overnight peso call rates backed up 500 bps to 15%. No quotes were available for the 30-day interbank rate. While central bank liquidity injection data had not been released for today, the central bank did inject around $7 mn yesterday. Brazil Inflation slowed in August, according to the IPCA index. Following July�s substantial 1.33% mom increase, August�s inflation index registered a 0.7% mom rise, which was broadly in line with market expectations. The absence of government controlled price increases were seen as an important contributing factor for the decrease in inflation. Emerging Europe, Middle East & Africa

Regional equity markets ended the day on a substantially weaker note today in spite of a rebound in Western European courses as reduced appetite for risk led investors to switch into safe haven country bonds, commodities and precious metals. Markets across the board failed to reverse the gloom evident at market opening Wednesday with telecom stocks seen as particularly vulnerable to heightened risk

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aversion. The Czech PX-50 closed down 2.8% to a 3 year low in higher than average volume. The Polish WIG-20 is down 3.7% for the day. The Hungarian BUX closed 4.0% lower. The Russian RTSI closed 5.3% lower today as the early morning rout failed to reverse. The South African bourse recovered from losses of around 6% and to close about 4.1% lower.

Regional currencies failed to recover from earlier weakness and closed down against the dollar Wednesday. The Czech koruna closed 0.4% weaker, while the Hungarian forint closed 0.9% weaker while the Polish zloty closed virtually unchanged. The ruble closed 0.4% weaker after initial dollar sales were reversed. The South African rand weakened 0.3% while the Turkish lira closed 2.4% weaker. The central bank of Turkey was reported to have intervened in markets as some nervousness at the retail level was seen pressuring the currency. Local currency bonds were mixed in the region with risk aversion concerns offset by expectations of a US interest rate cut.

Czech Republic The MoF is reportedly considering a delay until next year of the sale a stake in Cesky Telecom. While the results of a tender were due to be submitted to the cabinet by late October, but the purchase of shares in its mobile phone unit Eurotel (from AT&T and Verizon) appears to be causing the delay in the sale of Cesky.

South Africa The Reserve Bank injected 600 mn rand ($69.7 mn) into domestic capital markets today to maintain liquidity in local markets in light of the heightened volatility.

Global Markets Division, International Capital Markets Department:

Bankim Chadha, Chief Gabrielle Lipworth, Senior Economist Chris Morris, Senior Economist Anna Ilyina, Economist Subir Lall, Economist

Jens Nystedt, Economist Srikant Seshadri, Economist Mazen Soueid, Economist Martin Edmonds, Sr Fin Sys Officer

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* Latest yest. 12/31/00 Latest yest. 12/31/00 Latest yest. Latest yest. 12/31/00

UNITED STATES * 9,606 0.0 -11.0 3.21 3.26 5.44 5.40 5.46GERMANY € 4,336 1.5 -32.6 0.907 -0.7 -3.8 4.18 4.24 4.82 4.75 4.85UNITED KINGDOM 4,882 2.9 -21.5 1.466 -0.7 -1.8 4.80 4.89 4.87 4.88 4.88JAPAN 9,610 -6.6 -30.3 119.5 0.0 -4.2 0.06 0.06 1.43 1.42 1.63

ARGENTINA * 272 0.0 -34.7 1.00 n.a. 14.0 n.a. 1478 766BRAZIL 11,191 3.4 -26.7 2.68 -0.5 -27.2 n.a. n.a. n.a. 961 744MEXICO * 5,531 0.0 -2.1 9.44 0.8 1.9 n.a. n.a. n.a. 349 386

HONG KONG SAR 9,494 -8.9 -37.1 7.799 0.0 0.0 n.a. n.a. 5.72 5.72 6.46SINGAPORE 1,450 -7.4 -24.7 1.738 0.7 -0.2 2.31 2.25 n.a. n.a. 4.09

INDONESIA 430 -3.5 3.2 9040 0.6 7.0 17.9 17.9 n.a. n.a. 731KOREA 476 -12.0 -5.8 1285 -0.1 -1.5 4.91 4.91 n.a. 160 227MALAYSIA * 691 0.0 1.6 3.80 3.30 3.30 n.a. 229 279PHILIPPINES 1,241 -4.1 -16.9 51.2 0.2 -2.3 13.69 11.31 n.a. 564 629TAIWAN Province of China * 4,177 0.0 -11.9 34.6 0.3 -4.3 3.46 3.45 ---- ---- ----THAILAND * 330 0.0 22.7 44.4 0.0 -2.3 3.00 3.00 n.a. 136 183

CZECH REPUBLIC 331 -2.8 -30.9 37.63 -0.4 -0.9 5.2 5.2 n.a. n.a. n.a.HUNGARY 5,748 -4.0 -26.8 283.2 -0.9 -0.3 10.9 10.7 n.a. n.a. 132POLAND 1,075 -3.7 -40.8 4.24 0.0 -1.5 15.1 15.0 n.a. 217 241RUSSIA 195 -5.3 36.2 28.87 -0.4 -2.5 ---- ---- n.a. 824 1167

SOUTH AFRICA 8,112 -4.1 -2.6 8.631 -0.3 -12.2 n.a. n.a. n.a. n.a. 413TURKEY * 9,296 0.0 -1.5 1460000 -2.4 -54.2 ---- ---- n.a. n.a. 695

Percent change overEquities

9/12/01 1:40 PMB'mark BondsS-T RatesCurrenciesYields & SpreadsPercent change over Percent

1Source: Bloomberg Financial Markets LP; * denotes a holiday; Quotes are relative to data for previous NY (or local market) close.

Equity & currency prices reflect prior day's close.

2

2 Exchange rates are US$/local currency.

2

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