June 29, 2009 10:35
A growing number of Korean banks have been raising funds in Malaysia since early last year when the U.S. subprime mortgage crisis began to shake the world. The Korean government-backed Hana Bank issued US$284 million worth of bonds in Malaysia on June 22, and in February the Export-Import Bank of Korea issued $60 million worth of three-year maturity bonds in the Southeast Asian nation.
Some $1.3 billion worth of funds have been issued in the Malaysian market by Korean banks, including Woori Bank, National Agricultural Cooperative Federation, Industrial Bank of Korea, and Hyundai Capital Services. Last year Malaysia saw "an influx of foreign ringgit bond issuers," the Wall Street Journal wrote on June 22, "dominated by Korean banks."
What makes Malaysia so attractive to Korean financial institutions? The country offers advantages over not only the U.S. and European markets but also the Asian financial hubs of Hong Kong and Singapore. One such advantage is that Malaysia has become the first stop for Middle Eastern oil money interested in Asian markets. Thus, while Hong Kong and Singapore have been hit by the global financial crisis, Malaysia is enjoying a relative abundance of financial assets. With a view to becoming a financial hub for the Islamic world, Malaysia began issuing "Sukuk" Islamic bonds in 2001. As of late 2008, Malaysia's Islamic financial assets had grown to $51.83 billion, up 23 percent from the previous year.
The country also offers low interest rates. The Hana Bank bonds issued on June 22 bear a yield of the London Interbank Offered Rate (LIBOR) plus 2.99 percentage points. With the LIBOR currently at 0.6 percent, that works out to an annual rate of mid-three percent -- very attractive, considering that the top-ranking Korean banks are paying an added interest rate of six to seven percentage points in the international market.
Nevertheless, as the global financial market recovers, Korean banks may look to other international markets such as New York or London over Malaysia to raise funds if they can find competitive interest rates.
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