The Korean and Taiwan markets have shot up since 21 September 2001 when they hit a bottom, says John...
The Korean and Taiwan markets have shot up since 21 September 2001 when they hit a bottom, says John Hatherly, head of global analysis at M&G.
In the first quarter, the Kospi, the Korean index, rallied 29% in dollar terms, outperforming all major Asian stock indices except Indonesia. An economic rebound in the US should also spur demand for Korean goods. On 3 April, the Kospi rose 1.5% to 918,59, its highest since 11 February 2000.
Korea has performed extremely well over the past six months but is taking a breather at the moment as there has only been good domestic news, according to Michael Watt, director of Pacific equities at Henderson.
He says: 'There will probably be a technical correction but the fundamental valuations are still discounted. There is still growth in the economy and consumer demand.'
Emerging markets have also benefited from new investor interest. In 1998, the country had to apply to the IMS to be bailed out and since then has completely restructured the financial superstructure, says Hatherly.
Watt adds: 'Public debt is in a better situation but it is the restructure of the industrial financial system that has benefited the country. The financial system was run under Chaebols, which stifled change. These have since been dismantled and parts have been floated or sold off.
'There is a new attitude and a focus on shareholder value, which is making the stock market more appealing. Investment multiples were very low originally, and this is what has driven the market rise.'
Watt believes it is not in a bubble. He says: 'For a bubble to happen, the fundamentals need to go beyond value, but the dismantling has further to go. The good areas are manufacturing, technology and financials.'
Watt says: 'Providing the authorities do not do anything silly, such as interfere or back away from reform, Korea has a good year ahead.
'It is the best place of all the Asian markets to be, as the recovery is already under way and you cannot be as sure that other countries will have as strong a cyclical recovery or consumer demand.
'Within the M&G South East Asian fund, 27% is in Korea, a massive overweight position. It is always difficult to tell how much further the market has to go.' Hatherly cites Kookmin Bank and Koran Bank as holdings that are good restructuring stories.
He also likes Samsung Electronics and Humax, the digital satellite manufacturer, which has soared 94.14%, in local currency terms, for the year to 10 April 2002.
Watt has a weighting of 33% in the Henderson Pacific fund, which is 10% overweight the benchmark.
He says: 'The blue chips are looking attractive, such as Samsung Electronics and Hyundai Motor, which have cheap valuations relative to global companies.'
Hyundai Motor climbed to its highest price in almost seven years on expectations that the automaker will post better first quarter earnings.
Watt adds: 'At the tail end of the market, some small- and medium-sized companies that people gave up on, such as LG Electronics, are now performing very well.'
Korean recovery further to go.
Public debt is looking good.
Increased investor interest.
Some passive fees reduced by 50%
Creates platform business with £125bn AUA
'Annuities reinvented' paper
As US dollar strengthens