INVESTORS looking to hitch a ride on the Korean dragon might find this one of the best times to clamber on board. The Korean stock market has fallen about eight per cent over the past month as the presidential slush fund scandal has sent a number of domestic and international investors running for cover. News of the extent of former president Roh Tae-woo's iniquities and the involvement of many of the countries large conglomerates, or chaebols, has hit the Korean Composite Stock Price Index hard. It has dropped from a high of 1,016.66 in mid-October to currently trade at 946.35. Fund managers argue this fall is overdone and say the market is set to rebound over the next few months. They point to the strong fundamentals underlying the Korean economy and the good that will ultimately emerge from the clearing up of the endemic bribery system as the major reasons. 'We are very positive on Korea and this is an excellent buying opportunity,' said John Lee, vice-president of American investment house Scudder, Stevens & Clark and fund manager for Scudder's Greater Korea Fund, one of the 13 Korea funds authorised in Hong Kong. Mr Lee pointed to falling interest rates as the major boost to the Korean stocks. Benchmark interest rates in the country have already fallen from 15 per cent three months ago to 12 per cent and are still headed lower, he said. These will help boost stocks by making the stock market a relatively more attractive investment and improve corporate earnings. Jonathon Dutton, an analyst for SBC Warburg in Seoul, agreed this was a good time for investors to consider Korea. 'There is a general view that the incarceration of Roh Tae-woo signals the end of the major part of the slush fund scandal,' he said. 'I don't think you could discount that there may be further weakness next week but there is a strong argument there will be a rally in the next two months.' A number of factors are also set to help bolster Korean stocks. Korean economic growth is currently running at eight per cent and is set to rise to nine per cent next year before easing to 7.5 per cent for 1997. The Government is also gradually easing restrictions on foreign ownership on shares. The limit is 15 per cent but this is expected to be increased to 20 per cent soon. There is also a relatively low level of market capitalisation as a percentage of GNP. The total capitalisation of the Korean market is around 40 per cent compared to 74 per cent for Japan and 86 per cent for Taiwan. Nevertheless, there are some potentially negative factors. Mr Dutton warned of a possible slow down in corporate earnings over the next few years as higher inflation may lead the government to tighten credit.