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October 11 , 2001
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Goldman likes Korea, China stocks, upgrades India

China and Korea stocks offer the best values in Asia-Pacific amid heightened global risks and economic uncertainties, US investment firm Goldman Sachs said.

Goldman is overweight on both those markets, neutral on Australia and Hong Kong, and has upgraded India to neutral from underweight.

"Korea and China score well on our valuation measures," Goldman said in a report dated October 11. "Policy makers in both economies are also taking aggressive measures to offset the global economic weakness. We remain overweight in both, with a preference for Korea."

While India's location near Pakistan and Afghanistan presents 'some obvious political risks', Goldman said the market still has some attractive picks including petrochemicals maker Reliance Industries and state-owned refiner BPCL.

Afghanistan has been the focus of US-led military strikes since Sunday to flush out suspects of the September 11 hijacked plane attacks on New York and Washington. Its neighbour Pakistan has backed the action and allowed the use of its airspace.

Using criteria including dividend discount model risk, earnings risk and consensus 12-month price-to-earnings ratios, Goldman assigned scores to the countries.

Ranked from 1 to 11, with 1 being the best, Korea came in overall at 1, India 2 and China 3. The lowest score was the Philippines, at 11, with Thailand close behind at 10.

Goldman recommended buying 'well-run banks' with a consumer lending focus in Korea such as Hana Bank. In China, one of its picks is utility Huaneng Power International.

Looking at other markets, Goldman said Indonesia scored well (overall 5) on the valuation criteria 'but carries high political and liquidity risks'. Singapore (8) remains underweighted as is Taiwan (7) and the IT hardware sector.

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