FALLS CHURCH, Va.— Strong economic growth is the most important item on voters’ priority lists these days; ideological differences have taken a back seat in almost every electoral debate.

Many market observers have failed to grasp this reality, especially with regard to Asia and Russia, which last week’s report, The Re-Emergence of Russia, demonstrated. South Korean’s recent election is a case in point.

Until recently, South Koreans were more inclined to vote based on geopolitical issues and social ideology. South Korea achieved reasonable economic stability and a solid growth rate of 5 percent.

However, it seems Koreans have recognized that the country has more potential than that and voted for the presidential candidate who ran on a pro-business, pro-growth platform.

Lee Myung-Bak is the former CEO of Hyundai Engineering & Construction Company and former mayor of Seoul. From all accounts, he’s an overachiever, and his nickname, “Bulldozer,” indicates he’s a man who gets things done.

Lee’s message is pro-business and emphasizes economic liberalization. His campaign was built around the “747 Policy”: the three-part goal of 7 percent annual economic growth, USD40,000 GDP per-capita and becoming the seventh-biggest economy in the world. Currently, a USD18,500 GDP per-capita makes South Korea the 14th-largest economy in the world, just behind India and Russia.

Because the economy has performed well in the past several years without real incentives, the new growth targets look quite achievable, especially if the right economic policies are implemented. The new president has promised to reduce property taxes and maximum corporate taxes, the latter from 25 percent to 20 percent.

I expect property prices to rise again in South Korea, and bank-loan growth should pick up because consumption increases when people become more bullish on job creation and an economy’s future.

Regarding foreign policy, he favors deeper cooperation with China, Japan and Russia and a strong alliance with the US on the effort to resolve the North Korea issue. This is a pragmatic approach that should work well for the region in the long run.

There are challenges for the new president, but from an investor’s standpoint, an economically proactive policy is much preferred as the world economy enters a slowdown.

I’m bullish on South Korea and the Silk Portfolio has exposure to the domestic demand theme there through Shinhan Financial (Korea: 055550, NYSE: SHG) and Korea Electric Power (Korea: 015760, NYSE: KEP). This is the time to shift into domestic-focused stocks in Korea while trimming positions in more export-oriented companies.

Thailand’s recent elections are another relevant case. The People Power Party (PPP) that supported the exiled former Prime Minister Thaksin Shinawatra won a surprising 224 seats, according to the preliminary results, and could gain enough support from other parties to form a government.

The majority voted much differently than the sophisticated Bangkok ruling class had in mind while it marched in the streets for 15 months, angered by the prime minister’s corruption. That uprising spurred a military-led coup and the exile of Thaksin Shinawatra.

Last week’s results aren’t what the generals had in mind when they allowed the country to go to elections after a year of their incompetent rule. As things stand, polarization remains at high levels. And I wouldn’t rule out another coup if the victors can’t form another government–the country’s 19th in 75 years, all in the name of national unity for the good of the people.

That said, if a strong government emerges in Thailand, the economy could surprise on the upside this year because there’s plenty of pending domestic demand. The stock market could also make a big move, as stock prices have been discounting a very gloomy scenario.

The Silk Portfolio doesn’t include exposure to Thailand at this time, but I’ll be looking at the domestic sector of the economy for a potential recommendation as the story unfolds.

In the bigger picture, geopolitical games continue to affect the energy markets and the global economy. The most recent example is Iran’s effort for the construction of a north-south transportation corridor, including a $2 billion oil pipeline linking the Caspian Sea and the Persian Gulf.

The pipeline is part of Iran’s larger energy strategy to become a refining and transportation hub for its neighbors to the north, in addition to standing ground as the world’s fourth-largest oil producer. The plan also calls for a refinery that would boost Iran’s oil-processing capacity by almost 25 percent.

Iran is also pushing for a Kazakhstan-Turkmenistan-Iran oil link to add capacity. The three countries agreed last month to build a joint railway along the Caspian that will link Iran to Russia.

The aforementioned plans are meant to antagonize the US-supported gas project that will take Central Asia gas to western markets via Turkey, bypassing Iran.

Iran’s effort is taking place while Russia, Turkmenistan and Kazakhstan are progressing on the so-called Caspian pipeline agreement. It calls for a 20-billion-cubic-meter-long (bcm) pipeline (with potential to expand to 30 bcm) running along the littoral Caspian and connecting to the existing OAO Gazprom (Russia: GAZP, OTC: OGZPY) trunk link. Industry observers have said that in 2008 Turkmenistan will contribute more than 40 bcm to Russia’s gas balance; Uzbekistan and Kazakhstan supply almost 10 bcm each.

OAO Gazprom remains my favorite energy play in Russia (see Silk, 19 December 2007, The Re-Emergence of Russia).

At the same time, Asian countries continue to demonstrate their war capabilities. The most recent example is the Japanese destroyer that shot down a US test missile off the coast of Hawaii.

Japan has been testing its Aegis defense system, which is being operated from its destroyers as well as from the ground for sometime now. The government views this system as a practical deterrent of North Korean aggression. However, it can, of course, be used against other regional powers as well.

Japan will deploy four Aegis ships capable of intercepting ballistic missiles by 2010. Japan started installing Patriot missiles outside Tokyo in March and will continue to do so. For more on this arms race and its investment implications, see my Geopolitics and Investing report, The Dragon and the Eunuch: Wars, Spies and Profits in 21st Century Asia.

Portfolio Moves

As I mentioned last week, Kerry Group, the major shareholder of Long-Term Portfolio holding SCMP Group (Hong Kong: 583, OTC: SCPXY), is making an offer in an effort to take the company private. The stock is trading once again, and I now recommend selling out of it because you shouldn’t stick around for the outcome of this offer. Sell SCMP Group.

Fresh Money Buys

Because the investment process is constant, if you’d like to add to your positions in portfolio recommendations or allocate new funds in a diversified way, focus on the following markets, in order (for both countries and sectors). Consult the Portfolio pages on the left-hand side of your screen for details.

• Singapore (banking, telecommunications, industrial)
• South Korea (banking, electric power)
• Hong Kong (real estate, banking, infrastructure)
• India (pharmaceuticals)
• Russia (energy, telecommunications)
• China (consumer, coal, e-commerce, oil, water, power)
• Philippines (telecommunications, real estate)
• Malaysia (ETFs)
• Taiwan (technology, telecommunications)
• Europe (industrials, communications equipment)
• Japan (banking, industrials)
• Macau (gaming)