01.10.2021 (www.theedgemarkets.com) - KUALA LUMPUR (Oct 1): Bursa Malaysia Derivatives Bhd will be launching the East Malaysia Crude Palm Oil Futures (FEPO) contract, which aims to meet the evolving needs of the Sabah and Sarawak palm oil market players for greater price transparency and alternative risk management tool.
The FEPO contract, which recently received Shariah-compliant status, will be made available to traders next Monday (Oct 4).
The launch of FEPO will be officiated by Minister of Plantation Industries and Commodities Datuk Zuraida Kamaruddin, Chief Minister of Sabah Datuk Seri Panglima Hajiji Noor, and Chief Minister of Sarawak Datuk Patinggi Abang Abdul Rahman Zohari Tun Datuk Abang Openg in a virtual launch ceremony on Monday.
“With Sabah and Sarawak accounting for nearly half of the country's crude palm oil production, we identified a need to provide a hedging mechanism that caters to the East Malaysian palm oil players,” said Bursa Malaysia Derivatives chairman Datuk Muhamad Umar Swift in a statement.
Muhamad Umar, who is also the chief executive officer (CEO) of Bursa Malaysia Bhd, said the approved port tank installations in Sabah and Sarawak — namely in Bintulu, Lahad Datu and Sandakan — will improve the logistics costs of physical delivery and benefit both upstream and downstream market players in East Malaysia.
In 2020, the exchange’s port tank installations in Peninsular Malaysia delivered 670,125 metric tonnes of crude palm oil via its crude palm oil futures (FCPO) physical delivery, generating economic value for a wide range of businesses.
Similarly, the participation of new port tank installations in FEPO is expected to result in more job opportunities and higher economic values for the palm oil-related businesses in East Malaysia.
The FEPO contract is expected to entice international investors, the statement noted, particularly the commodity traders in China’s palm olein market of the Dalian Commodity Exchange, to trade on both Exchanges concurrently.
“Our FEPO contract offers valuable arbitraging opportunities with the existing actively traded FCPO, due to the price difference between crude palm oil from Peninsular Malaysia and East Malaysia
“Additionally, with its trading hours aligned with those of RBD Palm Olein in Dalian Commodity Exchange at 9am, the FEPO contract will attract commodities desks, including lauric oils traders and arbitrageurs looking for arbitraging opportunities between both markets,” added Bursa Malaysia Derivatives CEO Samuel Ho.
The introduction of the new FEPO contract will strengthen Bursa Malaysia Derivatives’ palm complex offerings, further cementing Malaysia's position as the global centre for palm oil price discovery.
“Bursa Malaysia Derivatives remains committed to collaborating with key market stakeholders to create more vibrant and attractive markets for all its customers around the world,” it added.