Leading South Korean Internet stocks have substantial growth potential but investors have underplayed the market, according to a Lehman Brothers Internet analyst. 'The Korean [Internet] market is leading the non-US world across a whole range of key metrics - Japan is about three steps behind,' Lehman communications and Internet research head Ravi Sarathy said. Korea has one of the highest Internet penetration rates in the world, with 30 per cent of all stock market transactions conducted on-line. The country was quick to adopt new technology, with a cellular telephone penetration rate of 47 per cent, making it the fifth-highest in the world, Mr Sarathy said. 'The culture is geared towards using [personal computers] and e-commerce. Since the late 1980s, Korea has used Intranet-based communication systems,' Mr Sarathy said. Early use of Intranet systems ensured Korean-language software was developed faster than in many Asian countries, making it easier for Koreans to use the Web. Yahoo! Korea has more page views than all Western European Yahoo! portals added together. Investors had yet to realise the advanced stage of Internet development in Korea, leaving the market leaders with plenty of upside from their present levels, according to Mr Sarathy. The best stock to gain exposure to this market was broadband Internet service provider Korea Thrunet, Lehman said. The counter, which listed on New York's Nasdaq Stock Market last month, was at US$68 in early New York trade yesterday, more than triple its listing price of $18. Yet the stock still has plenty of upside in the short term, according to Lehman, which led the company's Nasdaq offering. 'Thrunet is the key way to play this sector,' Mr Sarathy said. He recently put a three-month price target of $100 a share, 50.94 per cent above its closing price last week. The company had a first-mover advantage in the broadband market and was the first Korean Internet company to list on Nasdaq. Thrunet had struck alliances with Microsoft Corp and Motorola, widening the first-mover advantage lead. There is at present little differentiation between Internet stocks on the part of investors in Asia, which Mr Sarathy expects will soon change. 'Today the Internet sector moves as one homogenous whole - all the stocks go up or all the stocks go down.' Over the next six months, as more Internet-related companies list on stock markets, investors will start differentiating between success stories and those likely to fail. Leading Internet firms would rally strongly while others fell, Mr Sarathy said, meaning it was better to be selective in Internet stocks than to take a basket approach.