Thursday, January 11, 2007

Adding Kookmin Bank to the Portfolio

Today we're adding one more South Korean company to the portfolio, because it is a good company... and a conservative way to play the Asian economic boom.

Remember, we've already got some exposure to the developing Chinese energy market with our Korea Electric Power shares, which are trading slightly below our entry point (don't worry... this is a long-term play, and a slow-growth play...).

This is another pure play on South Korea's strong, steady economic growth, and the concordant growth in its banking and financial services sector. While China deservedly gets all the ink, South Korea's economy is booming too, which means an expansion in capital, savings, private banking services and lending.

Currently growing at 5% -- roughly twice the GDP growth of the U.S. -- Seoul expects the economy to cool to a still-strong 4.5% in 2007. But keep in mind also that the shares are a relative bargain, trading at 9.2 times the consensus earnings forecast. Meanwhile Citigroup is at 11 and China Construction Bank is at 15.

But another thing we like here for the long haul is South Korea's relative stability both politically and economically, despite the fact that Kim Jong Il is a few clicks away to the north. Kim won't be around forever, and with communism crumbling around the world (unless you count Venezuela) our Korean positions also represent an interesting speculation on the death of the North Korean dictator.


Buy Kookmin Bank (NYSE: KB), trading at $75.67, and place a 30% trailing stop under the shares.



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