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Market Comment

May 2006

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

Two interesting signals over the last month tending to point us in the same direction.China announced a rise in interest rates. This alone will not slowdown the Chinese economy much, if at all, but it illustrates a clearintention on the part of the Chinese authorities to slow lending andinvestment spending in overheated sectors of the economy. Wall Streetwobbled, though has now regained its poise.In the US, the Federal Reserve in the guise of Ben Bernanke,surprised markets when he inferred that US rates would peak this monthat 5%. The textbooks say that bonds should respond positively to suchnews. They haven’t, however, because the bond market thinks there is agood chance that Bernanke has got it wrong, that the US econom ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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