Bargain Hunting in Asia

Time to go bottom fishing?

It's hard for mutual-fund investors to find bargains, with both US and many foreign markets up sharply this year. But bargains may exist in Asia.

During the first nine months of 1997, stock markets in Thailand, the Philippines, and Malaysia fell about 35 percent. Stocks also fell in Japan (down 2.7 percent), South Korea (2.4 percent), Singapore (18.1 percent), and Indonesia (13.5 percent). In addition, several currencies have plunged, reflecting economic troubles that could continue to hurt Asian stocks.

Even so, the recent losses may have created buying opportunities for long-term investors.

One market to consider is Japan. After struggling throughout the 1990s, the Tokyo market shows signs of change. Corporate earnings are up for the fifth straight year. Meanwhile, Japanese stocks trade at relatively low prices compared with their assets and cash flow.

"Japan has several pieces falling into place that make it attractive to investors - especially the prospects for the yen to rise in relation to the dollar," says James Stack, publisher of the InvesTech newsletter.

Intrigued? Consider a modest investment - no more than 10 percent of long-term assets - in a fund such as Vanguard International Equity Pacific (800-662-7447; $3,000 minimum investment; no load). Matching the Morgan Stanley Capital International Pacific index, this fund has kept at least 75 percent of its assets in Japan, with exposure to five other Asian markets.

Investors willing to risk the severe fluctuations of other Asian markets might consider Matthews Pacific Tiger (800-789-2742; $1,000 minimum; no load). Since its inception in 1995, the fund has outperformed peers by carefully selecting small companies in emerging markets such as Hong Kong, Malaysia, and Singapore.