KUALA LUMPUR: The region's first US dollar-denominated crude palm oil futures (FUPO), which debuted on Bursa Malaysia Derivatives in the midst of the global financial meltdown last September, has not progressed as much as expected, Bursa Malaysia Bhd chief operating officer Omar Merican said.
Speaking at a panel dialogue at a palm and lauric oils conference here yesterday, Omar said this was partly due to timing of the entry into the market, the fact that it was US dollar-denominated contract and insufficient liquidity.
"In the decision-making to launch the contract last year, we underestimated the scale of the crisis.
"We deliberately decided to launch it partly because there is profitability. But the thing is that we didn't anticipate such a crisis downturn, and as a result, there is shrinking of liquidity. Most people are experiencing some kind of capital loss and commodity funds are no different," he said.
Omar said marketing was also an issue. "When our ringgit expertise markets the US dollar-denominated product, we did not do well enough. Coupled with the economic crisis, it was probably one of the not-so-smart decisions one could make," he admitted.
FUPO is trading alongside the ringgit-denominated crude palm oil futures (FCPO).
On another matter, Omar believed there was some 20% potential speculative activity in the CPO market. While that was not unusual, Omar said Bursa Malaysia was still able to maintain a good price discovery.