G. Paul Matthews Sees Riches in Asia

One exception to that rule is in the area of software for electronic games and wireless. Some of the South Korean game companies have come a long way in the last five years, especially in terms of attracting international software writers. The Garriot brothers, for example, are now working for NCSoft in Seoul.

It's one area where they are making significant strides.

How do the South Korean video-game companies stack up on valuations? Their U.S. competitors sport a high P/E multiple.

The same is true in Seoul.

Again, it's early days. We don't have significant exposure to this sector. But I think this is an area that will be a growing part of our and other portfolios over the next several years. In the same way that over the past five years, domestic food companies, domestic soft-drink distributors, domestic financial-service businesses have been growing. I think we'll see a similar trend during the next five years.

3. Moving on to geopolitical matters, what is your assessment of the U.S.-North Korea tensions? How will this affect Seoul and other regional markets?

I'm no more of a political expert than anybody else, but I have been following the North Korean situation for the best part of 20 years. I would say that the level of tension today doesn't feel to me to be as bad as it was back in the early '90s, or even the early '80s. Having said that, the consequences of something going wrong are clearly much more severe because of the improved technology supposedly possessed by the North.

To put the whole thing in perspective: I happened to be in Seoul in 1994, the last time this issue reached a hiatus. In 1994, the Korean economy was apparently in much better shape than it is today. The Korean market was trading between 900 and 1100 on the Kospi; the currency was 50% higher than today. What's been important in the ensuing periods has less to do with politics and much more to do with the economy. The economic performance in Korea drove both the very disappointing market performance between 1994 and 1998 and the dramatic recovery since 1998.