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INVESTMENT ANALYSIS

The international financial services sector came under close scrutiny, culminating in the announcement of the mer- ger between Swiss Bank Corporation and Union Bank of Switzerland.

This will create the world&#39s second-biggest bank and biggest fund manager at the cost of an estimated 13,000 jobs. As has been the case in so many instances this year, the share prices of both parties involved have risen significantly.

This is further evidence of the levels of corporate activity which have been seen across Europe over the last two years and marks a significant shift in Europe away from the industrial sector and into the financial sector. Further such rationalisations in the financial services industry cannot be ruled out.

The banking sector also led the rises in the UK market, driven by multiplying speculation about wide-ranging rationalisation within the industry. The centre of interest is currently National Westminster Bank which is the subject of a variety of merger/takeover stories.

In Japan, the focus is on the absolute amount to be dedicated to writing off bad debts for the system as a whole, with Yen10 trillion the figure most commonly rumoured.

It is likely, however, that the final sum may be somewhat lower than this and the mechanism for injecting this into the financial system has not yet been finally resolved, so considerable room for disappointment remains.

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