Asia's Phones Whisper Promise

Lilia Clemente hunts for undervalued growth stocks worldwide. And where is she finding them? Asia--believe it or not. "The region is more volatile than ever, in the wake of its economic woes. But it is where the bargains are," says the chairman of Clemente Capital, which runs two closed-end mutual funds listed on the Big Board. The company is based in New York and Beijing. The Clemente Global Growth Fund was ranked No.1 by the Lipper Closed-End Funds Performance Analysis Service for 1997.

Clemente is high on four Asian telecom stocks that trade through American depositary receipts: China Telecom (Hong Kong) (CHL), Nippon Telegraph & Telephone (NTT), Philippine Long Distance Telephone (PHI), and South Korea's SK Telecom (SKM). The gloomy economic outlook, says Clem-ente, has turned them into low-risk, highly attractive assets. They all have slumped from earlier peaks. "These are companies with strong balance sheets and large capitalizations," she notes.

China Telecom, now at 33 a share, hit 42 in March. She says it may reach 45 in a year. "Compared with its peers in Europe and the U.S., it is cheap," says Clemente: It sells at a price-earnings ratio of 21, based on estimated 1999 earnings. The company provides cellular services to China's wealthy provinces and is expected to dominate the market, with its superior network coverage and solid subscriber base.

Nippon Telegraph, trading at 43--down from 52 1/2--should snap back to 60 in a year, figures Clemente. The company dominates local and long-distance services in Japan but has yet to do business overseas. "Earnings are likely to improve with increasing mobile-phone traffic and rising demand for Internet services," says Clemente.

Philippine Long Distance dominates the country's domestic and international phone markets, including cellular services. The company uses its size to extract favorable interconnection fees and is able to control access to its own network. It is a "safe haven" for investors in Asia, says Clemente. Now at 23, the stock is down from its 52-week high of 34 1/2. Clemente expects it will rebound to 35 in 12 months.

SK Telecom is South Korea's largest provider of mobile-telecom services. It plans to expand into computer and Internet communication. Currently at 6, the stock should climb to 10 in a year, figures Clemente, confident that by that time the government will have solved some of Korea's problems.