With Taiwan's historic presidential election behind us and Taipei-Beijing tensions lower for the moment, we can now turn our attention to the next major election in the Asia-Pacific region: Korea's April 13 general election, which will determine the makeup of the country's

National Assembly

.

While not quite at the same level of historic importance as Taiwan's election (and lacking the excitement of a threat of invasion), the Korean vote is nonetheless critical. President

Kim Dae Jung

, who was elected in 1997 and who has presided over a remarkable economic recovery, is expected to lose ground in the National Assembly. Last month, his ruling coalition fell apart, and whatever the makeup of the Assembly, Kim will have to concoct a new one. That promises to be difficult, as a confusing assortment of opposition parties have sprung up in the past few months.

All of this is important to investors with holdings in Korea, particularly in mutual funds with exposure to the country. Economic reform in Korea, which has been a model for other Asian countries, has essentially been put aside for the time being. While most analysts feel the government will get back on track after the election because all parties agree on continued economic reform, no one can be sure. Such concerns have been a factor in a 20% decline over the past few months in the

Kospi

, the main Korean stock index. Many Korean investors remain infatuated with the tech-heavy

Kosdaq

, although it is also down roughly 20%.

Korea Is Not Taiwan

Investing professionals don't view the Korean election as a very good buying opportunity, in sharp contrast with Taiwan at its election time. Taiwan, as I wrote

last week, was a layup for investors. Historically, Chinese saber-rattling at Taiwanese election time translates into stock-market declines and eventual rebounds. That, of course, happened in Taiwan, although much more quickly than most analysts had estimated.

Korea's dynamic is similar to Taiwan's -- the market is down over election uncertainty -- but the situation there is a bit murkier. For starters, there are concerns that because the economy has rebounded so strongly, a sense of complacency might stall further reforms. In addition, some feel that the economy is growing too fast --

gross national product

rose 10% last year, with at least 6% growth expected this year -- and the government may raise interest rates to slow it, although officially it has shown no signs of doing so. "Korea might be doing a little bit too well," says Gerald Smith, head of the Asia-Pacific department at

Guardian Baillie

, which manages the

(GBEMX) - Get Report

Guardian Baillie Emerging Markets fund. "If there is a worry, it is that the economy is so strong we have to worry about inflation picking up."

Thus, unlike with Taiwan, U.S. and foreign investors are sitting this one out, waiting to see what happens. Smith, for example, is not increasing his positions in Korean companies right now, though they constitute the largest percentage in the fund, which is up 16% since the beginning of the year. Nearly 3% of the fund is in Korean conglomerate

Samsung

.

Other investors are carefully surfing for bargains. Mark Headley, portfolio manager of the

(MAKOX) - Get Report

Matthews Korea fund, thinks many blue-chip companies listed on the Kospi are undervalued. While his fund is down 16% this year, it is up a healthy 62% over the past 12 months. He especially likes

Samsung Electronics

. He is also buying Korean companies, most notably software-protection firm

Cybertech

for his

Asian Technology

fund.

Kosdaq Fever

Further clouding the investment picture in Korea is the remarkable rise of the Kosdaq, where a great many new tech start-ups have been listed. Korea now has the highest percentage of online traders in the world, and those punters, like their American counterparts, are enamored of trading in tech.

Smith and Headley are a bit more cautious about companies on the Kosdaq. "There is an awful lot of froth in this market," says Smith, pointing to outrageously high valuations. Headley calls it "feverish" and says many companies listing there are simply too immature and are not ready to be public. However, with no capital-gains tax in Korea, there is little incentive for Korean investors not to speculate. "Plus, gambling is otherwise illegal in Korea," Headley notes, tongue in cheek. The Kosdaq obsession is keeping money out of the Kospi and will probably continue to do so, no matter what happens on April 13.

While, regretfully, the Korean election may not provide a Taiwan-style buying opportunity, Korea's still a good bet over the long term. It has huge potential as a tech market, with mania for the Internet and other tech goods. Economic reforms have resulted in a real restructuring of the economy. In the near term, however, with an uncertain political situation and irrational exuberance in the Kosdaq, the picture is less bright.

Reader

Kevin Narramore

noted that I missed a closed-end India mutual fund in Wednesday's

column -- the

Jardine Fleming India

(JFI)

fund. It is up 40% this year and rose 134% in 1999. Many thanks for bringing this fund to my attention.

David Kurapka's Global Portfolio column appears Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

dkurapka@thestreet.com.