Best Ways to "Cash in on Asia"

09/05/2003 12:00 am EST

Focus:

Neil George

Editor-in-Chief, Income Publication and Products, Agora Financial

"China, Korea, and a few other markets in Asia are where the world economy is really cooking," says  Neil George and Yiannis Mostrous in Personal Finance.  "If you're looking for aggressive plays into Asia's top markets, we've picked two companies that we believe are the best ways to cash in on what's working now and what will be for a long time to come."

"First is Posco (PKX NYSE), which was established in Korea in 1968, and by 2002 was the fourth-largest steel maker in the world. Posco has become one of the great beneficiaries of China's growth. China is the largest consumer on earth. And its steel output has been continuously rising for 20 years. Put another way, without China, the global consumption of steel would have declined in four out of the last five years.

"Posco, together with Taiwanese and Japanese steel companies, supplies the value-added steel products (such as sheet materials) that now represent almost 80% of China's steel imports. Posco is the lowest-cost producer in the world, has the largest market share of auto sheets (which China needs) outside Japan, and historically some of the highest margins in the industry. Furthermore, management has been focused on stockholder value. Recently it pledged to buy back and cancel 2% of the shares outstanding and it announced the highest interim dividend in the company's history. Buy below 35.

"Second is Hutchison Whampoa (HUWHY NASDAQ), which is the second largest listed company in Hong Kong. Hutchison is a conglomerate in the true sense of the word, with operations spanning telecom, container ports, property, hotels, retailing, manufacturing, oil and gas, and infrastructure. And it's a market leader in most of its businesses in Hong Kong and from Asia/Pacific and Australia to Europe and the Americas. In June, the company's legendary (and in some conspiratorial circles, infamous) chairman, Li Ka-shing, bought 5.4 million shares for HK $260 million (US $34 million). Cash has never been a problem for Hutchison.

"Besides cash from operations that are always strong, the company occasionally sells part of companies or businesses it owns that aren't viewed as core to its strategy. For example, Hutchison recently sold some of its stakes in Vodafone and Deutsche Telekom for $2.6 billion in cash and got another $3 billion from dollar-denominated bonds issued earlier this year. The ADR isn't heavily traded so make sure to use a limit order to buy Hutchison Whampoa below 35."

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