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Korea’s new boom shouldn’t go bust


I have just got back from a visit to Korea. It's booming. National output rose 3% in real terms last year. Economic growth is accelerating. It grew at an annual rate of 3.7% in the past quarter and I reckon it's got further to go. Something near 6% this year looks likely.

The equity market has been riding a global tide of liquidity for some months. The central bank pumped up money supply by 20% in 2000 and another 10% last year. Stock prices have been underpinned by a recovery in industrial production and raised profit expectations.

And more money is entering than leaving the country, with foreigners buying up Korean stocks.

With inflation low and the currency stable, domestic monetary policy should continue to be supportive too.

Most important, there is a global recovery in manufacturing and IT goods in which Korea is well placed to gain market share.

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