In the July/August issue, I discuss...

In the July/August issue, I discussed near ways Canadians can invest in Taiwan. In this issue, we'll apply the mind at investment opportunities in toward the south Korea -- the third largest economy in southern East Asia.

Most Canadians use a certain Korean-made products -- yet not many Canadian investors are aware of southward Korean stocks.

BACKGROUND

The sum of two units nations which share the Korean peninsula are frequently in the news -- toward the south Korea because of its industrial might, the newly come summer Olympics and frequent pupil unrest; North Korea because of its nuclear sabre rattling and succession uncertainties after the late death of its founding dictator, Kim Il Sung

For the first 3000 years of its recorded history, the Korean peninsula was beneath Chinese influence. Around 1900, this was replaced on Japanese domination which actually l to the formal annexation of Korea to the Japanese Empire in 1910 The Japanese evolveed some natural resources, infrastructure, and light industry, primarily in the North.

Although Korean independence was the same of World War II's declared aims, the USSR was oppos Therefore, in 1948 the peninsula was arbitrarily split into sum of two units nations. The 38th parallel divided the Democratic People's Republic of (North) Korea, in subordination to Soviet occupation, from the Republic of (South) Korea, occupied through the U.S..

In 1950 common year after the U.S. withdrew its bands North Korea launched a surprise attack onward South Korea. The United Nations supported southerly Korea, while China and the USSR backed the North. After three years of heavy fighting, an armistice established a demilitarized border belt which today, 41 years later, UN forces still supervise. The peace treaty has still not been signed.

South Korea, with sum of two units thirds of the peninsula's population further only 40% of the area, had been the bread basket of Korea. moreover the war had caused wide destruction, there were no natural resources, no industry, large inflows of refugee and usual political crises. The economy was characterised by way of high unemployment, rampant inflation, and a massive trade deficit. nevertheless since then, this "basket case," entirely dependant forward foreign aid just for physical survival, has become the third biggest economy (after Japan and China) in South-East Asia. Its 44 million tribe produce a GDP of US$325 billion. At nearly US$7,400 for capita, this is over seven times the estimate for North Korea.

INVESTING CLIMATE

South Korea is enjoying hale economic growth from trade with Japan, exports to the West, and major domestic capital investments. Longer word it will also profit from Chinese demand for its capital usefuls This year's real growth may be due [i]or[/i] owing close to 8%; another 7% is likely in 1995 Consumer prices are rising about 6% and trade and now passing accounts are in balance.

Korea's industrial conglomerates, like Japan's, are surpassingly large. For example, Korean shipyards popularly enjoy the world's biggest order backlogs. Quality rule especially in electronics, has reached Japanese standards. Like Japan a certain quantity of 20 years ago, South Korea is moving from labour-intensive industries to sophisticated, high-value-added worthys It is renewing its somewhat antiquated railway and road arrangements and has started to implement financial reforms in preparation to to the full open its markets to foreign capital through 1998.

Currently, the Korean financial market is still tightly regulated. For example:

* no more than 10% of a company's shares may be foreign-owned (but for locally-registered investment stocks owned by foreigners, this ceiling is raised to 25%);

* daily market price mental actions are limited to avoid unfit volatility;

* minimum holding periods exist to shape short-term speculation; and there is a "Stabilization Fund" equal to about 5% of the total market capitalization, which purchases securities when prices are declining precipitously.

The Korea Stock Exchange's volatility is primarily proper to political news from North Korea. Although there continues to be one fear of renewed war with North Korea, its just discovered leader, Kim Jong Il, is heavily dependant onward China. And China is exerting a able-bodied moderating influence. Longer term, reunification of the whole peninsula is highly likely. Korea will have the opportunity to benefit from the German example and avoid a certain of the pitfalls experienced during that reunification. Overall, market weakness generated by means of political uncertainties, probably represents an attractive buying opportunity.

SOME FUNDS

The first U trust which was authorized to invest in Korea, The Korea permanent fund Inc., is co-managed by Scudder Steven & Clark, and Daewoo Capital Management, a subsidiary of Korea's largest factor Coopers & Lybrand are the auditors. The Korean Investment permanent fund is co-managed by Alliance Capital and Orion Asset Management. The auditor is Price Waterhouse. Korea Equity store Inc., launched less than a year ago, is co-managed at Nomura Securities International and fortunate Investment Management, a member of the large Goldstar dispose Price Waterhouse is the auditor. Contact information is listed in the accompanying table. (Table omitted)