SOUTH Korean mutual funds have filled four of the top seven places in the top-performing Asian country funds sector over the past 12 months, according to figures from Micropal and the Hong Kong Investment Funds Association. Baring International Asset Management's Korea Fund headed the sector with a 73 per cent return over the 12 months to the end of October. The Jupiter Tyndall GF Korea fund was third with a 70 per cent rise followed by JF (60 per cent) which was ranked sixth and GT's Korean Growth fund (53 per cent), ranked seventh. Credit Lyonnais' Pakistan Fund was the best performing of non-Korean funds in the sector and ranked second overall with a return of 71 per cent, according to the figures, measured in US dollars, by Micropal. Looking at performance since the start of 1994, the South Korean funds took six of the top eight places, led by Jupiter Tyndall with a return of 38 per cent. Manager of the US$90 million (about HK$700 million) top-ranked Baring Korea Fund, Kim Hun Soo, said part of the success was due to picking good stocks early after corporate earnings mushroomed 78 per cent in the first half of the year. 'The fund took positions in more good quality stocks than other investments,' said Mr Kim. 'This hinged on finding out which stocks are going to be good performers early rather than having to chase shares in companies that are already going up,' he said. South Korea's petrochemical industry has the heaviest weighting in the Baring portfolio with 13.9 per cent followed by electronics with 11.7 per cent. Iron and steel accounts for almost 11 per cent, with the balance made up in construction, bank, retailing and transport stocks. According to HKIFA chairman Roger Pyrke, South Korea's economic development is in a 'catching up' phase compared with other booming economies of the region. 'When other economies were booming, Korea was in the doldrums,' he said. 'Earlier tensions between North and South Korea have gone to the back of investors' minds and they are now eager to get back into offshore and onshore Korean investments.' South Korea's inflation rate is 7.4 per cent - modest by Hong Kong standards - and its exports have been given a competitive edge by the strong Japanese yen. The country still limits foreign investment to 10 per cent of a company although the ceiling is scheduled to be lifted to 12 per cent next month. The change has prompted a wave of speculative buying by local investors in South Korea who expect foreign funds to boost their presence in the market. South Korean fund performances also offer a sharp reminder that the funds industry is still well behind the massive returns offered by leading funds last year. In the year to the end of October, 1993, nine funds reported gains of more than 100 per cent. Of those, the Philippines and Thailand provided the most spectacular gains. According to Micropal, Thornton's New Tiger Philippines Fund was the best-performing Asian single country fund over the year with a 170 per cent return, followed by JF's Thailand fund with gains of 163 per cent. For the first 10 months of 1994, Thornton ranked 11th in the single Asian country sector with a gain of 49 per cent gain and JF's Thailand fund ranked eighth with a 51 per cent improvement. Pakistan also reflected a sharp turnaround of fortunes, with the Credit Lyonnais Pakistan Growth Fund up 70 per cent for the 12 months to the end of October after being the worst-performing fund in the sector in 1993 with a 17 per cent loss over the year. According to Robert Brewis, manager of the CL fund, earnings growth for the market should be close to 25 per cent over the next year.