G. Paul Matthews Sees Riches in Asia

Two quick follow-ups: What is the percentage of foreign ownership in South Korea, and, what do you expect from the Seoul economy for the coming year?

Foreign ownership in the Korean market is about 35% -- it's substantial.

On the other hand, domestic investor own less of their own market than they have in years. We'd like to see domestic investors show more confidence in their local economy. I don't think they're held back by geopolitics, I think they're held back by corporate profits. Clearly, they voted in this last election to continue the current strategies as far as negotiations with the North are concerned. But they also voted to continue with economic reform and restructuring, which has been the lynchpin of the recovery so far.

We'd like to see more restructuring; a resolution of some of the problems in the investment-trust sector that apparently are imminent; and we'd like to see individuals playing a greater investment-role in their domestic market.

I think we can see a year where growth will be in the order of 4%-5%. Given the outlook for elsewhere in the world, that remains a pretty positive picture.

4. You've usually had broader exposure to South Korea. Does this continue to be the case? What specifically do you like? In the past, you've mentioned a preference for Korean wireless.

We still have exposure to Korean telecoms. We still have significant exposure to the Korean consumer. We still have exposure to the financial sector in Korea. And we still have exposure to Samsung.

How is the outlook for the banking sector? Are you concerned about rising consumer debt levels?

Clearly the growth engine last year was the expansion of consumer credit; that is now slowing. The expectation going into this year is that the smaller and medium-size enterprises and larger corporations in Korea will have to step up their corporate investment and that any expansion in credit will come from the corporate side. I think this would be a healthy balance for the Korean financial system, if it occurs. This is something threatened by uncertainties posed by the global economy. It may seem odd to say this, but in many ways, the threat of military action in Iraq weighs as heavily on the Korean economy as the threat of military action in Korea itself -- something still inconceivable to most Koreans.

The Iraq situation is more real, particularly as it has a continued impact on the price of oil, on which Korea is still dependent. Corporations in Korea may be reluctant to step up their capital-investment plans, given the uncertainty over oil prices.