Speaking with regard to the UK market, Tim Bray, manager of the New Star UK Dynamic Fund observed that:

"The market still has momentum and positive economic statistics could yet give strength to cyclical and technology stocks. Companies have also restructured so profits should improve. This should enable the corporate sector to take some of the pressure off the consumer and public sector in driving the economy forward."

"More defensive stocks are, however, likely to find favour again later in 2004 as the market's more cyclical areas begin to look fully valued."

For the rest of Europe, meanwhile, New Star suggested that cyclical and technology stock valuations look too high, and that the best value may be found in companies which performed well in both good and bad times.

The fund manager also predicted that the outlook for Japanese equities is healthy in 2004, and that emerging markets generally face another good year.

Brian Coffey, manager of the New Star Global Emerging Markets Fund suggested that:

"Despite a 50% dollar gain in 2003 the relative valuations for Emerging Markets remain attractive as earnings growth expectations leave forward valuations at a significant discount to developed markets."