Bursa Malaysia to launch USD palm oil futures

01 August 2007 10:14  [Source: ICIS news]

SINGAPORE (ICIS news)--Bursa Malaysia is planning to launch a US dollar-based crude palm oil (CPO) futures contract sometime in the third quarter in order to complement its existing ringgit-based contract, said company officials on Wednesday.

 

The new contracts will compete directly with the Singapore-based Joint Asia Derivatives Exchange (Jade), a USD CPO futures contract launched in June, though trading volumes have been thin so far.  

 

CPO futures trading had attracted much interest in the past year and several non-traditional players like hedge funds had also started trading them, said a regional trader. This has resulted in record high CPO prices of over ringgit (M$) 2,600/tonne ($748/tonne) in July.

 

Although no official statement had been issued by Bursa Malaysia regarding the date of the launch of a USD futures contract, sources at the exchange said that this was likely to be launched at the end of September or October.

 

Malaysian media reports had quoted the exchange’s CEO Yusli Mohamed on Tuesday saying it planned to launch US dollar-denominated CPO futures contracts in September.

 

Jade - a joint venture of CBOT Holdings and the Singapore Exchange (SGX) -.was meant to benchmark Indonesian palm oil but traded volumes had been thin in the first month, said a regional broker. This could have been due to traders’ existing comfort levels with Bursa’s ringgit-denominated futures or cheaper dealing costs there, he added.

 

Liquidity on Bursa Malaysia’s existing CPO contract hovered between 5,000-20,000 contracts per day, significantly higher than Jade’s, brokers said.

 

Crude palm oil prices had been propped up by rising crude values, which prompted increased biodiesel production last year, said Laren Tan, head of OTC clearing and derivatives at Singapore’s Ginga Petroleum.

  

($1 = M$3.46)

 

By: Anu Agarwal
+65 6780 4359

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