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					            Prudential International Investments Advisers, LLC.
                                   Global Investment Strategy – February 2008
                                            By John Praveen, Chief Investment Strategist
          For Market Commentary Interviews Contact: Lisa Villareal, 973-367-2503/lisa.villareal@prudential.com
Financial Market Outlook & Strategy: Summary
John Praveen’s Global Investment Strategy –February 2008 expects stocks to struggle and market volatility likely to remain high in
the near-term with the U.S. on the brink of a recession / stagnation and slower growth in Europe and Japan, further declines in corporate
earnings, especially among Financials as they continue to write-down sub-prime losses, fears about rating downgrades for bond
insurers, and increased stress in credit markets. While the U.S. Federal Reserve (Fed) rate cuts thus far and expectations of further rate
cuts, fiscal stimulus and attractive valuations should help stocks to stabilize and recover over the next few months, in the near-term
stocks are likely to struggle. Hence we further reduced the equity overweight in our model.
We have raised bonds to neutral, as stocks are likely to struggle in the near-term. Bonds are likely to post further modest gains with
the U.S. economy on the brink of recession / stagnation, slowing growth momentum in Europe and Japan, further rate cuts by the Fed,
and continued turmoil in financial markets. However, bond gains are likely to be limited by elevated inflation and reduced safe-haven
appeal as credit and equity markets stabilize. We have increased our cash holding to reduce risk and will use cash to buy stocks once
markets stabilize.
Within stocks, we have lowered Developed Markets to neutral and remain overweight on Emerging Markets. Within Developed
Markets, we are overweight in the U.S. and U.K., and underweight on Eurozone and Japan. Within bonds, we are overweight on U.S.
Treasuries and Japanese bonds (JGBs), neutral on U.K. Gilts, and underweight on Eurozone bonds.
Financial Market Outlook: Stocks Continue to Struggle on U.S. Recession Fears. Modest Bond Gain
Stocks: Stocks Continue to Struggle with U.S. on Brink of Recession & Financial Market Stress.
•    Stocks began 2008 with a sharp sell-off in January on rising U.S. recession risks, huge loss write-downs by Financials,
     deteriorating credit conditions, and risk of rating downgrades for bond insurers. The Fed responded to the deteriorating growth
     outlook and equity market sell-off with an emergency 75 bps rate cut on January 22, followed by another 50 bps rate cut on
     January 30. Meanwhile, the Federal Government announced an agreement on a $150 bn fiscal stimulus package. These measures
     helped temper U.S. recession fears and stabilize equity markets, paring January losses. The MSCI Developed Market Index still
     posted the sharpest January loss on record, down –8.5 percent in local currency and –7.7 percent in US$.
• Macro conditions have become more challenging for stocks. U.S. recession risks have increased further with very weak data in
     January and February, while growth momentum is slowing in Europe and Japan. Aggressive rate cuts by the Fed and fiscal
     stimulus are likely to support the U.S. economy in the first half of the year (H2) but may not be enough to prevent a recession in
     the second half of the year (H1). In Eurozone, despite credit tightening and slowing growth, the European Central Bank (ECB)
     remains on hold, though it softened its tone after the February meeting.
• U.S. Q4 earnings have been a big drag on U.S. stocks led by Financials. With 75 percent of companies reporting, S&P 500
     earnings are tracking –20 percent with Financials earnings down –105 percent. Excluding Financials, earnings are tracking around
     +11 percent.
• Globally, earnings growth is likely to slow in H1 2008 to under 5 percent pace as Financials, especially in the U.S. and Europe,
     continue to write-down sub-prime losses. While earnings recovery in H2 2008 is likely to support stocks, in the near-term, earnings
     uncertainty and other disappointments are likely to keep market volatility high.
• The equity sell-off since the October highs has significantly improved equity valuations with trailing price earnings (P/E) multiples
     for Developed and Emerging Markets falling. Stocks have become even cheaper relative to bonds and other asset classes, with
     stock yields rising (on falling P/E multiples) while bond yields have fallen sharply.
Looking ahead, stocks are likely to continue to struggle with high market volatility in the near-term with the U.S. on the brink of
recession/stagnation and slower growth in Europe and Japan, further declines in corporate earnings, especially among Financials
as they continue to write-down sub-prime losses, fears about rating downgrades for bond insurers, and increased stress in credit
markets. However, rate cuts by the Fed, the Bank of England (BoE) and European Central Bank (ECB) (likely), U.S. fiscal
stimulus, attractive valuations and multiple expansion should help stocks to stabilize and recover over the next few months.
Bonds: Modest Bond Gains with Slower Growth & Further Rate Cuts.
•    Global bonds posted solid gains in January as yields tumbled on strong safe-haven appeal amidst a sharp global equity sell-off
     driven by heightened U.S. recession fears.
•    Bond yields fell in all markets. Ten-year Treasury yields fell to under 3.45 percent in mid-January before rising to 3.6 percent at
     month-end. Eurozone yields fell over 40 bps to under 3.9 percent before ending January at 3.95 percent. Japanese ten-year yields
     fell below 1.35 percent for the first time since September 2005 before moving higher after the Fed’s rate cut, ending January at
     1.45 percent.


Prudential International Investments Advisers, LLC. is a subsidiary of Prudential Financial, Inc. (NYSE:PRU)
For Informational Use Only. Not Intended As Investment Advice.                                                        Page 1
                                   Global Investment Strategy – February 2008
•    Looking ahead, bonds are likely to post further modest gains with the U.S. economy on the brink of recession/stagnation,
     slowing growth in Europe and Japan, further rate cuts by the Fed and BoE and likely the ECB, and continued turmoil in
     financial markets. However, bond gains are likely to be limited by elevated inflation due to high oil and food prices, and
     reduced safe-haven appeal as credit and equity markets stabilize.
Investment Strategy: Stocks Continue to Struggle. Reduced Stock Overweight in our Model
ASSET ALLOCATION: Stocks, Bonds, Cash
• Further Reduce Stock Overweight: Further reduce risk and equity overweight lowering Developed Markets to Neutral. Stocks are
   likely to struggle in the near-term with the U.S. on the brink of a recession/stagnation, further declines in corporate earnings,
   especially among Financials, fears of rating downgrades for bond insurers, and increased stress in credit markets.
• Increased Cash: Increased cash to reduce risk. Will use cash to buy stocks once markets stabilize.
• Raise Bonds to Neutral: Raised Bonds to Neutral as stocks continue to struggle in the near-term. Bonds are likely to post further
   modest gains with the U.S. economy on the brink of a recession, slowing growth in Europe and Japan, further rate cuts by the Fed,
   and continued turmoil in credit markets.
GLOBAL BONDS
• Overweight: U.S., Japan. 1) U.S.: Treasuries supported by further deterioration in U.S. GDP, further Fed rate cuts and continued
   credit markets dislocations. 2) Japan: GDP growth remains weak. The Bank of Japan (BoJ) on hold. Increased risk aversion.
• Neutral: U.K. Growth momentum slowing. Further BoE rate cuts. Inflation rising.
• Underweight: Eurozone. Slower growth. Inflation at record high. ECB remains on hold. Valuations high.
GLOBAL EQUITIES
• Overweight: Emerging Markets, U.S. 1) Emerging Markets: Macro outlook positive despite U.S. slowdown. Earnings remain solid.
   Valuation improved. 2) U.S.: Aggressive Fed rate cuts – 125 bps in January. Further rate cuts to 2.5 percent in H1 2008. Slower
   earnings offset by multiple expansion. Supportive valuations.
• Modest Overweight: U.K. Further rate cuts by BoE. Attractive valuations but weaker earnings. GDP growth slows sharply.
• Underweight: Eurozone & Japan. 1) Eurozone: GDP growth slowing but ECB remains on hold. Slower earnings with Financials
   losses. Valuations attractive. 2) Japan: Growth outlook negative. Valuations still at premium to other markets. Slower earnings.
GLOBAL SECTORS
• Overweight: Info. Technology & Telecomm. Modest Overweight: Energy, Industrials, Consumer Staples, Healthcare.
• Underweight: Utilities, Materials, Consumer Discretionary, Financials.
CURRENCIES
• Overweight: Euro. Underweight: U.S. Dollar, Yen, Sterling.
• Dollar resumed its downtrend against the euro and yen in January with the U.S. economy on the brink of a recession and the Fed
   responding with aggressive rate cuts. Yen rallied on unwinding of carry trades. Pound sterling weak on soft U.K. growth outlook
   and BoE easing.
• In the near-term, the dollar is likely to remain weak due to continued recession fears and expectations of further Fed rate cuts.
   However, in the medium-term, the dollar is likely to stabilize against the euro as European growth slows prompting ECB rate cuts.
   Yen to resume weakness once carry trades resume due to soft fundamentals. Sterling to remain in a downtrend.
Stock Market Outlook & Strategy: Stocks Struggle with U.S. on Brink of Recession & Financial
Market Stress
Stocks began 2008 with a sharp sell-off in January on rising U.S. recession risks, huge loss write-downs by Financials, deteriorating
credit conditions, and risk of rating downgrades for bond insurers. Fears of the worsening U.S. economic outlook and further big sub-
prime loss write-downs by leading financial firms led to a sharp global equity sell-off in mid-January. The Fed responded to the
deteriorating growth outlook and equity market sell-off with an emergency 75 bps rate cut on January 22, followed by another 50 bps
rate cut at the January 30 Federal Open Market Committee (FOMC) meeting. Meanwhile, the Federal Government announced an
agreement on a $150 bn fiscal stimulus package. These measures helped temper U.S. recession fears and stabilize equity markets,
paring January losses.
The MSCI Developed Market Index still posted the sharpest January loss on record, down –8.5 percent in local currency and –7.7
percent in US$. The January 2008 losses wiped out 2007 Developed Market gains. The U.S. market fell –6.2 percent with a modest
recovery at the end of the month, while international markets (EAFE index) fell –9.3 percent (in US$). Emerging Markets suffered
even sharper losses due to a spike in risk aversion, falling –12.6 percent in both LC and US$.
Looking ahead, stocks are likely to continue to struggle with high market volatility in the near-term with the U.S. on the brink of
recession/stagnation and slower growth in Europe and Japan, further declines in corporate earnings, especially among Financials
as they continue to write-down sub-prime losses, fears about rating downgrades for bond insurers, and increased stress in credit
markets. However, rate cuts by the Fed, the BoE and ECB (likely), U.S. fiscal stimulus, attractive valuations and multiple
expansion should help stocks to stabilize and recover over the next few months.

Prudential International Investments Advisers, LLC. is a subsidiary of Prudential Financial, Inc. (NYSE:PRU)
For Informational Use Only. Not Intended As Investment Advice.                                                     Page 2
                                   Global Investment Strategy – February 2008
Regional Equity Strategy
Emerging Markets: Macro fundamentals are positive. Growth slows from strong 2007 pace but remains solid as domestic demand and
intra-emerging market exports offsets U.S. slowdown. Inflation is largely contained. Earnings outlook remains solid, around 15 percent,
with even stronger earnings in China and India. Valuation advantage relative to Developed Markets eliminated, but Emerging Markets
are not expensive. Modest tightening in some markets, and strengthening currencies are negatives. We Remain Overweight.
U.S.: Fed cut rates aggressively by 125 bps in January. We expect Fed to further cut rates to 2.5 percent in H1 2008. Historically,
stocks have gained in the 12-months following rate cuts (in majority of cases). U.S. GDP slowed sharply in the fourth quarter (Q4),
growing at just a 0.6 percent pace after 4.9 percent in the third quarter (Q3). Deteriorating labor markets and falling business
confidence appears to have pushed the economy to the brink of recession/stagnation in early 2008. Fed rate cuts and fiscal stimulus
should help the U.S. economy post a modest recovery in H2. Q4 earnings growth is tracking –20 percent with Financials earnings down
–105 percent. Consensus expectations are for 3 percent earnings growth in the U.S. in Q1 and 4 percent in Q2 2008 dragged down by
Financials. However, earnings in other sectors expected to remain positive supported by weak U.S. dollar, relatively better non-U.S.
growth and some pricing power. P/E multiples are likely to expand following the Fed rate cuts, supported by improved valuations.
Impact of slower earnings will be offset by multiple expansion. We Remain Modest Overweight.
U.K.: BoE cuts rates by 25 bps in February and is likely to cut rates further in 2008. Q4 growth was solid at 2.9 percent year-on-year
(YoY), but growth is expected to slow sharply in H1 2008 to below 2 percent with cooling housing market and tighter credit conditions.
Valuations are attractive both relative to recent trend and relative to other markets. Sterling will remain weak against most currencies
except U.S. dollar. We Remain Modest Overweight.
Eurozone: Eurozone growth indicators continued to point to a significant loss of momentum in H1 2008. Eurozone growth is
estimated to have slowed to around 2 percent in Q4, slowing further to well under 2 percent in H1 2008. Despite credit market
tightening and slowing growth momentum, the ECB remained on hold in February on inflation concerns, but softened its tone.
Headline inflation is at record high of 3.2 percent. Valuations are attractive relative to the U.S. and Japan. Losses at European
Financials are likely to take a toll on overall earnings. Earnings growth is also slowing due to weaker growth, strong euro, and surging
energy prices. Strong euro is another negative for Eurozone equities. We Downgrade to Underweight
Japan: Japan’s economy remains anemic. GDP growth likely slowed to around 1 percent in Q4 and is expected to remain weak in H1.
Inflation is moving firmly into positive territory due to high-energy prices with core inflation at a nine-year high of 0.8 percent in
December. BoJ remained on hold in January and significantly lowered its growth outlook, opening the door for a possible rate cut. P/E
multiples fall, but valuations are expensive relative to other markets. Slower earnings growth is due to the impact of weaker global and
domestic growth and the impact of a stronger yen. We Remain Underweight.
Bond Market Outlook & Strategy: Modest Bond Gains with Slower Growth & Further Rate Cuts
Global bonds posted solid gains in January as yields tumbled on strong safe-haven appeal amidst a sharp global equity sell-off driven
by heightened U.S. recession fears. The Fed responded to the worsening economic outlook and the sharp global equity sell-off with an
inter-meeting emergency 75 bps rate cut on January 22, followed by a 50 bps rate cut at the scheduled meeting on January 30. The Fed
rate cuts helped to temper recession fears and stabilize equity markets, which caused a modest uptrend in yields at month-end. The JP
Morgan Global Bond Index rose 1.4 percent in LC and 2.9 percent in US$. In 2007, global bonds posted a LC gain of 3.8 percent and
an even stronger 10.8 percent US$ advance on dollar weakness.
Looking ahead, bonds are likely to post further modest gains with the U.S. economy on the brink of recession/stagnation, slowing
growth in Europe and Japan, further rate cuts by the Fed and BoE and likely the ECB, and continued turmoil in financial markets.
However, bond gains are likely to be limited by elevated inflation due to high oil and food prices, and reduced safe-haven appeal as
credit and equity markets stabilize.
Regional Bond Strategy
USA: U.S. GDP slowed sharply in Q4, growing at just a 0.6 percent pace after 4.9 percent in Q3. Deteriorating labor markets and
falling business confidence appears to have pushed the economy to the brink of a recession in early 2008. Fed cut rates aggressively by
125 bps in January. We expect the Fed to further cut rates to 2.5 percent in H1 2008. U.S. headline inflation remains elevated at 4.1
percent YoY in December, which will keep modest pressure on yields. Treasury yields are likely to be supported by weak U.S. growth
data and further Fed rate cuts. We Are Overweight Treasuries
Japan: Japan’s GDP growth likely slowed to around 1 percent in Q4 and is expected to remain subdued in H1 due to a slowdown in net
exports with sharply slower global growth and yen strength, and deteriorating domestic demand on softer construction and weak
consumption. Inflation moved firmly into positive territory due to high energy prices with core inflation at a nine-year high of 0.8
percent in December. BoJ remained on hold in January and significantly lowered its growth outlook, opening the door for a possible
rate cut in coming months. We Are Modest Overweight JGBs




Prudential International Investments Advisers, LLC. is a subsidiary of Prudential Financial, Inc. (NYSE:PRU)
For Informational Use Only. Not Intended As Investment Advice.                                                      Page 3
                                   Global Investment Strategy – February 2008
U.K.: GDP growth was more resilient than expected at 2.9 percent YoY in Q4. While Q4 growth surprised on the upside, the cooling
housing market and tighter credit condition are likely to slow U.K. growth in H1 2008 to below 2 percent. BoE cut rates in February
and is likely to cut rates further in 2008 with growth outlook deteriorating after the solid growth in 2007. Yields could see some upward
pressure from expectations of a significant uptrend in inflation in coming months. Real rates and historical yields are low, while
valuations are expensive. We Are Neutral U.K. Gilts
Eurozone: Eurozone growth indicators continued to point to a significant loss of momentum in H1 2008. Eurozone growth is
estimated to have slowed to around 2 percent in Q4, slowing further to well under 2 percent in H1 2008. Despite credit market
tightening and slowing growth momentum, the ECB remains on hold due to inflation concerns. However, the ECB softened its tone
after the February meeting, acknowledging that downside risks to growth had increased and the uncertainty about the outlook was
“unusually high”. The crosswinds of higher inflation and slowing growth will likely keep yields range bound in the near-term, but the
prospect of ECB rate cuts will provide support in the medium-term. We Are Underweight Eurozone Bonds
Global Sector Strategy
Our global sector model ranks sectors on a comparative basis using macro factors, valuation, earnings and risk measures.
• Information Technology: S&P500 Technology’s Q4 earnings are tracking up around 25 percent. Earnings outlook remains
   optimistic. Earnings revisions remain positive for the sector. Solid demand and orders more than offset pricing pressures. Sector is
   benefiting from a style shift for growth stocks. However, relatively high valuations may limit gains. We Are Overweight.
• Telecomm Services: Sector is defensive in volatile markets. Valuations are modestly negative. S&P500 Telecomm’s Q4 earnings
   are tracking up 5 percent. Relative sector earnings outlook is positive. Earnings revisions remain positive. Sector has a high
   dividend yield. Margins solid as sector is benefiting from restructuring, cost reduction and pricing power from consolidation and
   new products. We Are Overweight.
• Consumer Staples: Defensive sector. Relative earnings outlook is a negative. However, earnings revisions are positive. S&P Q4
   earnings are tracking up 9 percent. Potential for near-term earnings and sales growth. Relative sector valuations are expensive. We
   Are Modest Overweight.
• Energy: Oil prices remain high at around $90 despite concerns about U.S. growth outlook as Emerging Market demand remains
   solid, and demand-supply balance remains tight. Valuations have become neutral. Earnings revisions remain positive as S&P500
   Q4 earnings are tracking up 11 percent. We Are Modest Overweight.
• Healthcare: Defensive nature of the sector is a key positive. Sector valuations are attractive on both historical and current basis.
   Earnings outlook for the sector remains at around 11 percent. Restructuring and weak dollar are positives. Negative news flow has
   eased. Attractive dividend yield. Sector is likely to benefit from style shifts to large cap stocks.      We Are Modest
   Overweight.
• Industrials: Industrial activity slowing sharply in the U.S. and Eurozone, but still solid in Emerging Markets. Earnings and
   valuation scores are modestly positive. Aerospace and Defense supported by defense orders. Conglomerates to benefit from global
   exposure and style shift to large caps. We Are Modest Overweight.
• Consumer Discretionary: Q4 Earnings are down –15 percent for S&P500 Consumer Discretionary. The sharp U.S. growth
   slowdown, ongoing decline in housing, and sub-prime problems are negatives. Earnings outlook is negative due to slower
   consumer spending in most regions. Valuations are positive due to the sharp sell-off. We Are Underweight.
• Financials: Earnings fell sharply due to the huge loss write-downs. S&P500 Financials’ Q4 earnings are tracking down –105
   percent. Earnings outlook is negative for H1 2008 as firms continue to write-down sub-prime losses. Fed & BoE rate cuts and
   likely rate cuts by other central banks are positives. U.S. housing weakness and losses from proprietary positions are negatives.
   Valuations have become attractive after sharp equity sell-off in January. We Are Underweight.
• Materials: S&P500 Materials’ Q4 earnings are tracking down –17 percent thus far. Commodity prices remain firm due to solid
   Emerging Market demand and tight supply. However, both earnings and valuation scores are negative for Materials. Earnings
   revisions have been very negative over the past two months. We Are Underweight.
• Utilities: Slower macro conditions support the sector. However, Sector valuations are expensive. Support from M&A and LBOs
   has been removed. Earnings outlook is relatively negative. We Are Underweight.
Strategy Summary: Stocks Continue to Struggle. Reduce Stock Overweight in our Model.
Asset Allocation – We Further Reduce Stock Overweight, Increased Cash, Raise Bonds to Neutral.
Global Bonds – We are Overweight: U.S., Japan. Neutral: U.K. Underweight: Eurozone.
Global Equities – We are Overweight: Emerging Markets, U.S. Modest Overweight: U.K. Underweight: Eurozone & Japan.
Global Sectors – We are Overweight: Info. Technology & Telecomm. Modest Overweight: Energy, Industrials, Consumer Staples,
Healthcare. Underweight: Utilities, Materials, Consumer Discretionary, and Financials.
Currencies – We are Overweight: Euro. Underweight: U.S. Dollar, Yen, and Sterling.




Prudential International Investments Advisers, LLC. is a subsidiary of Prudential Financial, Inc. (NYSE:PRU)
For Informational Use Only. Not Intended As Investment Advice.                                                       Page 4
                                     Global Investment Strategy – February 2008

Disclosure:
Prudential International Investments Advisers, LLC (“the Company”), a subsidiary of Prudential Financial, Inc., is an investment adviser registered with the Securities and
Exchange Commission of the United States. The commentary presented is for informational purposes only, and is not intended as investment advice. This material has
been prepared by the Company on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no
assurances are provided regarding the reliability of such information. All opinions and views constitute judgments of the Company as of the date of this writing, and are
subject to change at any time without notice. There can be no assurance that any forecast made herein will be realized.
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referenced herein are included solely for illustrative purposes regarding economic trends and conditions or investment process and may or may not be held by accounts
managed by the Company or by its affiliates. The strategies and asset allocations discussed do not refer to any service or product offered by the Company or by its
affiliates. The global asset and strategy allocation models presented are hypothetical allocation models shown for illustrative purposes only, and does not necessarily
reflect the management of any actual account. Following the allocation recommendations presented will not necessarily result in profitable investments. Past performance
is not an assurance of future results. Nothing herein should be viewed as investment advice or as a recommendation, solicitation, or an offer to buy/sell any security, or to
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Prudential International Investments Advisers, LLC. is a subsidiary of Prudential Financial, Inc. (NYSE:PRU)
For Informational Use Only. Not Intended As Investment Advice.                                                                                      Page 5

				
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