Bursa Malaysia’s FCPO continues to hit record highs this year

KUALA LUMPUR: Bursa Malaysia’s crude palm oil futures (FCPO) has continued to achieve new highs this year, Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar said.

In March, it hit a new record monthly trading volume of 1.66 million contracts and the highest daily trading volume with over 125,000 contracts, he said.

Furthermore, FCPO had become a well-balanced product with an equal 50-50 participation between institutional traders and other market participants, Abdul Wahid said.

“We are encouraged by the consistent growth and view this as a positive development that indicates the rising confidence in Bursa Malaysia Derivatives’ products to manage price risk exposures,” he said in his welcoming address during the virtual Palm and Lauric Oils Price Outlook Conference & Exhibition (POC) today.

Abdul Wahid also said that since its establishment in the 1980, FCPO had continued to be the most successful commodity futures contract in Malaysia, positioning the country as the global price benchmark for the crude palm oil market.

“To demonstrate the extensive usage of FCPO globally as a hedging instrument, some 268 million metric tonnes of palm oil, the underlying instrument for FCPO, were traded in 2019, representing 3.5 times the world production,” he added.

Meanwhile, he said Bursa Malaysia Derivatives remained committed to strengthening the palm complex suite to cater to the demand of market participants and provide a reliable hedging and arbitrage instrument against price volatility in the palm oil industry despite the challenges due to the unprecedented healthcare crisis.

With more than one million deaths and 36 million cases to-date, he said assessing the economic impact of COVID-19 remained challenging due to the extreme speed in which the crisis continues to unfold.

According to him, price volatility is no stranger to the market, yet this pandemic outbreak has shaken the commodities sector.

“Reduced demand due to the slowdown in economies around the world has led to falling prices as well as disruptions to the production and supply chain,” he noted.

On the importance of sustainability, he said Malaysia, as one of the world leaders in the palm oil industry with a 26 per cent market share of palm oil production, was in a strong position to do the right things, and do things right.

“The Malaysian palm oil industry has led the way in sustainability certification. This is evidenced in the mandatory requirement for plantation companies to obtain the Malaysian Sustainable Palm Oil certification, or MSPO, to reinforce the commitment of supporting the people, environment and wildlife.

“Nevertheless, the challenges of building a sustainable future are immense and require collaborative efforts and innovative thinking from all stakeholders.

“Each one of us has a role to drive the long-term sustainability of the industry, and I am confident that this POC platform will allow us to share our vision and commitment towards the advancement of this industry,” he concluded. – Bernama