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China Firms Keen on US$ CPO Futures Contracts



Futures broker Oriental Pacific Futures Sdn Bhd said its clients in China are keen to trade in US dollar-denominated palm oil futures contracts.

Bursa Malaysia plans to launch its US dollar-denominated crude palm oil futures contract (known as FUPO) this year, to attract more foreign traders and investors.

“Half of our clients are in China and the remaining half are in Malaysia. We’re briefing all our clients on the impending launch of FUPO. So far, our Chinese clients are receptive as it minimises currency exchange risk,” said executive director Ricky Chin Kok Thye.

“Most of our clients in China have an appetite for risk. As speculators, they will find FUPO convenient as it is cash settled. They don’t need to take physical delivery,” he told Business Times when met on the sidelines of POC2008 (Palm & Lauric Oils Conference 2008) held in Kuala Lumpur yesterday.

When FUPO is launched on Bursa Malaysia derivatives market, traders can then arbitrage between FCPO, traded in ringgit, and FUPO.

Oriental Pacific is wholly-owned by China-based Tianjin Longwit Oils and Grains Co Ltd. Both companies were exhibiting at POC2008.

Chin said as early as 2005, Tianjin Longwit has been planning to set up a futures trading company in Malaysia. As China‘s palm oil consumption increases by the year, many refiners find it beneficial to hedge their purchases in the futures market.

“Futures prices are indicative for the physical market. Refiners, in protecting their position, need to hedge on the futures market. As the volume builds up, it becomes necessary for Tianjin Longwit to set a base in Malaysia,” he said.

Source – Business Times