KUALA LUMPUR, Oct 1 — Bursa Malaysia Derivatives Bhd will be launching the East Malaysia Crude Palm Oil Futures (Fepo) contract on Monday to meet the evolving needs of the Sabah and Sarawak palm oil market players for greater price transparency and alternative risk management tool.

In a statement, Bursa Malaysia said the Fepo contract, which recently received Shariah-compliant status, will be made available to traders on October 4, 2021.

The virtual launch of Fepo will be officiated by Plantation Industries and Commodities Minister Datuk Zuraida Kamaruddin, Sabah Chief Minister Datuk Seri Hajiji Noor and Sarawak Chief Minister Datuk Patinggi Abang Johari Tun Openg.

Bursa Malaysia Derivatives chairman and Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift said the exchange has identified a need to provide a hedging mechanism that caters to the East Malaysian palm oil players, as Sabah and Sarawak account for nearly half of the country’s crude palm oil (CPO) production.

"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,” he said.

In 2020, the exchange’s port tank installations in Peninsular Malaysia delivered 670,125 metric tonnes of CPO 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, Bursa Malaysia said.

Meanwhile, Bursa Malaysia Derivatives chief executive officer Samuel Ho said the Fepo contract offers valuable arbitraging opportunities with the existing actively traded FCPO due to the price difference between CPO from Peninsular Malaysia and East Malaysia.

"Additionally, with its trading hours is aligned with those of refined, bleached and deodorised (RBD) palm olein in Dalian Commodity Exchange at 9:00 am, the Fepo contract will attract commodities desks, including lauric oils traders and arbitrageurs looking for arbitraging opportunities between both markets,” he said.

The exchange said 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.

It said 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. — Bernama