Bursa Malaysia Bhd, operator of the nation’s stock exchange, said it expects the volume of palm- oil futures trading to more than double in the next two to three years following a stake sale and tie up with CME Group Inc.
About 20 percent of palm-oil contracts in Malaysia are traded through international investors, Bursa’s Chief Executive Officer Yusli Yusoff said. The exchange is also seeking to raise the valuation of the commodity’s derivatives, which he said are trading at a discount to other products such as soya oil.
CME “will help elevate palm oil’s visibility and close that price gap with other edible oils,” Yusli said in a Bloomberg Television interview. “We are going to leverage CME’s status as a market leader and this will help elevate the international profile of our derivatives exchange offerings.”
Bursa is counting on the agreement with the world’s largest futures market to strengthen Malaysia’s position as the global price benchmark for crude palm oil futures. It also enables CME to tap demand for palm oil trading outside Malaysia, the world’s second-largest producer.
CME will buy a 25 percent stake in Bursa’s derivatives unit and license its palm oil settlement prices to tap demand for the world’s most-traded vegetable oil, the two companies said on Sept. 17. The collaboration will lead to the listing of all existing and future Bursa Malaysia derivatives products on CME Globex, CME’s electronic trading platform, they added.
Attracting Investors
“We see this as a medium to long-term initiative,” Yusli said from Kuala Lumpur.
Bursa is looking to attract more investors to bolster trading in Malaysia’s equities and derivatives markets. The benchmark FTSE Bursa Malaysia KLCI Index has risen 39 percent this year, trailing behind Southeast Asian benchmark indexes.
Yusli also expects the number of initial share sales to increase in the next 18 months as the economy recovers, starting with Maxis Communications Bhd., Malaysia’s largest mobile-phone operator, which is expected to go public in the fourth quarter.
“We see the pipeline to be quite interesting for next 18 months,” he added.
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