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KUALA LUMPUR: Traders believe that a recent move by China’s Dalian Commodity Exchange to open its palm oil futures contract to international investors should provide some degree of competition, but will not affect Bursa Malaysia Derivatives (BMD) in the short term. .
Beginning on December 22, China allowed foreign investors access to trading its palm oil futures contracts in an effort to become a global commodity pricing powerhouse.
Palm oil trader David Ng said that the crude palm oil futures (FCPO) prices of the BMD contract would remain relevant to different market participants, as it has established a global reference price, aimed at producers and plantation companies as a way to hedge price risk.
“The recent move by the Dalian Commodity Exchange to allow foreign participation in the palm olein contract will allow competition. However, Malaysian palm oil prices reflect commodity prices, while Dalian reflects prices of oil. final product, “he told Bernama today.
He opined that BMD prices are closely related to the underlying fundamentals of the industry, as both prices serve different interests serving different participants.
“The measure can be seen as a complementary measure rather than price competition between the two markets,” he said.
Ng was commenting on a recent Reuters report on China’s uphill bid to set a global benchmark for palm oil futures, especially with Malaysia as the most influential producer in the industry.
Traders said the contract would not affect MDB prices at this time, as it would take a few years for China to reach a global benchmark level.
Meanwhile, Interband Group of Companies senior palm oil trader Jim Teh projected that it would take about five years for the Dalian Commodity Exchange to reach the global benchmark level, although it was considered to have mild competition or an effect about the BMD.
“Most international traders will be cautious when trading China futures. They will probably have more domestic players coming in at this time, as international traders might be skeptical,” he said.
However, he said China’s move would also be a wake-up call for BMD to be more creative by proposing more ideas and incentives for industry players to continue operating in the local derivatives market.
“As BMD continues to improve to keep its international operators and attract new players, we should be doing well in the long term,” he said.
The third month benchmark for the Crude Palm Oil (CPO) futures contract on BMD for March 2021 traded at RM3,569 per tonne on Thursday. – Bernama
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