Bursa Malaysia Launces East Malaysia Crude Palm Oil Futures

Bursa Malaysia Derivatives Berhad will be launching the East Malaysia Crude Palm Oil Futures (“FEPO”) Contract to meet the evolving needs of the Sabah and Sarawak palm oil market players.

The launch of FEPO by Minister of Plantation Industries and Commodities will be made available to traders on 4 October 2021. According to Bursa CEO Datuk Muhamad Umar Swift the reason for this was with Sabah and Sarawak accounting for nearly half of the country’s Crude Palm Oil production, there was a need to provide a hedging mechanism that caters to the East Malaysian palm oil players.

“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, 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,” commented Samuel Ho, Chief Executive Officer of Bursa Malaysia Derivatives. “Additionally, with its trading hours aligned with those of RBD Palm Olein in Dalian Commodity Exchange at 9:00am, the FEPO contract will attract commodities desks, including lauric oils traders and arbitrageurs looking for arbitraging opportunities between both markets.”

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.

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