money managers shuffling their Asian portfolios are finding Korea increasingly attractive. For American billionaire investor Warren Buffett, for example, China is out, and Korea is in. During his visit to Asia late last month, Buffett cautioned against overreaching in China. Yet he expressed confidence in Korean equities, describing the country as "one of the world's most attractively priced markets."
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Take LG.Philips LCD (LPL), which has maintained its debt level well below half its equity. The world's second-largest maker of liquid-crystal display (LCD) panels was bleeding red ink for four consecutive quarters until March of this year because of a supply glut in the industry. Yet the company last month reported a net profit of $573 million for the July-September period, its strongest profit in 13 quarters, against a loss of $249 million a year earlier, as demand for thin panels for computers and TVs grew.
Decoupling from the U.S. Economy The dwindling dependence of Korea's cyclical industries on the U.S. economy is good news in the face of slower consumer spending in America (BusinessWeek.com, 11/26/07). "To some extent, the Korean economy has been decoupled from the U.S. economy," says Chang In Hwan, chief executive at Seoul fund manager KTB Asset Management. "A spending crunch in America will be felt much more mildly here now than it was a few years ago," he says.
Encouraged by the more balanced industrial strength, a growing number of Korean consumers are putting their money in stocks instead of in real estate and bank deposits. The amount of money in equity mutual funds, or investment trust funds as they are known locally, reached $111 billion this month, up from $50 billion at the end of last year. "Short-term corrections and fluctuations are inevitable, but in the longer term better corporate profitability and improved liquidity will drive the Korean market upward," says Chang.