KOREA FUND QUINTUPLES ON WON-WAY BETS

It was the last thing Mark W. Headley expected.

His Matthews Korea Fund was down 64.7% in 1997 and the news from the Far East was bleak. But money kept pouring into the fund, quintupling assets to $75 million from $15 million in early December.

“We’re pleasantly stunned,” says Mr. Headley, a managing director for San Francisco-based Matthews International Funds, which include several Asia-focused funds.

Investors coming in run the gamut from Main Street types to the most savvy international investors, such as Sir John Templeton, Mr. Headley says. And the firm is averaging 100 calls a day, quite a jump from the 10 to 20 calls from investors the firm previously had received.

Investors looking for bargains have been rewarded so far. The fund gained 35% in the first two weeks of 1998, on a par with the market’s rebound. Companies in the fund include the Korea Electric Power Co. and S1 Corp., an installer and operator of security systems.

Investors also are encouraged by the Korean government’s response to the crisis.

President-elect Kim Dae Jung is asking workers to accept rising unemployment, which would enable corporations to downsize and help stabilize the currency, the won.

The investors jumping in are “bottom feeders who are saying that Korea will come back to some extent,” says Bill Rocco, a Morningstar Inc. analyst based in Corvallis, Ore.

In addition, investors could have been tax trading by taking a loss on their Southeast Asian funds to offset gains made in, say, a European fund, Rocco notes. The Korea fund also attracts investors because open-ended single-country funds are hard to find. “They’re locking in their losses, but they’re not selling at the bottom,” Mr. Rocco says. “They’re just going from one fund to another.”

Hedge funds have put some money into the Korea fund, Mr. Headley says, to avoid paying $1.50 for a $1 share in a closed-end Korea fund.