By Yoon Ja-young
Staff Reporter
Funds coming from Islamic countries are increasing in the capital market here, according to Koscom, the stock market operator.
It stood at a mere 128.9 billion won in the fourth quarter of 2007, but over 3 trillion won flew into the Seoul stock market in 2008.
Islamic money in the bourse increased to 3.2 trillion won last year, with 122.7 billion won arriving in January.
The money is part of the huge assets that they accumulated during the global oil price hike.
"The oil money snowballed upon surging global oil prices between 2007 until early 2008, and Islamic finances rose with the development of Middle East countries like the United Arab Emirates," said Lee Sun-ho, a manager at Korea Development Bank.
"Despite the financial crisis, assets continued to grow in the Islamic world, and the outlook is also positive."
Islamic financial assets totaled $822 billion last year, and is estimated to reach $1 trillion this year.
Funds from these countries were also invested in the global financial giants of the United States and Europe after the collapse of Lehman Brothers.
The Korean stock market is welcoming the inflow of oil money, amid growing concern that dollars may start leaving the country.
The KOSPI gained last year thanks to the dollar carry trade, which is where the dollar is borrowed at low interest rates and invested overseas. Part of the dollar carry trade took place in Korea, hiking the index.
However, the dollar's value is rising as the U.S. Fed raised its key discount rate. Fiscal troubles in some Southern European countries are also pulling up the value of the greenback.
"Having witnessed the global financial crisis triggered by subprime mortgage troubles, investors are much more sensitive about domino-like financial crises. Preference for the dollar grows as people consider it a safe asset," said Yoon Ja-kyoung, an analyst at Mirae Asset Securities.
When the dollar carry trade ends as the currency gets more expensive, Islamic funds are expected to make up for the loss in the local bourse.
Local financial companies are also paying attention to the Middle Eastern funds. Woori Investment & Securities, for example, signed an MOU with Qatar Islamic Bank for corporate financing and investment, and Shinhan Investment Corporation is considering opening an overseas office in charge of Islamic finance. Korea Investment & Securities has set up an Islamic finance team.
Issuance of sukuk, an Islamic bond, totaled $23.6 billion between January and November last year, up 18 percent from $20 billion in 2008.
Global businesses increased the issuance of bonds in Islamic capital markets as the ones in the United States and Europe were hit hard by the global financial crisis.
chizpizza@koreatimes.co.kr
