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Market Traders Must Be Prepared To Capitalise On Price Volatility ; Bursa Malaysia Chairman Tan Sri Abdul Wahid


KUALA LUMPUR:According to Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, market participants must be prepared to capitalize on increased price volatility caused by the challenging operating environment and markets.

He stated that this is because global macroeconomic headwinds are likely to persist in 2023.

He says that when the market is volatile, commodities producers and consumers might find that exchange-traded derivatives are good ways to reduce risk and keep portfolio values.

“As the worldwide center for palm oil cost revelation, Bursa Malaysia Subsidiaries stays unfaltering in fostering an economical commercial center by working on our biological system and upgrading our items as solid supporting instruments against cost unpredictability,” he said in his introductory statements at the Palm and Lauric Oils Gathering and Display (POC2023).

Abdul Wahid gave the instance of Bursa Malaysia’s recent introduction of the Alternative Delivery Procedure (ADP) in September 2022 for its primary contracts, which are East Malaysia crude palm oil futures (FEPO), crude palm kernel oil futures (FPKO), and crude palm oil futures (FCPO).

He stated, “The ADP facility enables sellers and buyers to make and take delivery of contracts on terms other than those specified by the exchange, or to re-negotiate delivery terms that are more compatible with their physical business operations.” These options are available to both buyers and sellers of contracts.

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On the viewpoint of the business, Abdul Wahid said the Malaysian palm oil industry is supposed to keep up with its powerful standing and exhibit solid development notwithstanding the continuous worldwide financial vulnerability and downturn fears in 2023.

Given favorable weather conditions and improved labor conditions, he stated that crude palm oil (CPO) production is expected to rise by 3% to 19.0 million tonnes in 2023, up from 18.45 million tonnes in 2022. This increase is due to the expansion of mature planted areas, particularly in Sarawak and Peninsular Malaysia.

The Malaysian Palm Oil Board (MPOB) anticipates that exports of Malaysian palm oil will increase by 3.7 percent to 16.30 million tonnes in 2023, up from 15.72 million tonnes in 2022, owing primarily to continued demand from importing countries.” This estimate is in line with the Malaysian Palm Oil Board’s projection.

As producers, processors, and end-users compete for a share of the global vegetable oil markets, CME Group executive director of agricultural products Nelson Low stated that the unpredictability surrounding palm oil as a result of policy changes and price movements of related oils has made it even more important for them to manage price risks using futures and options.

“We saw Malaysian palm oil futures retreat from a one-month high in mid-January this year as traders took profit,” he added. “Additionally, losses in rival edible oils due to higher-than-expected US supplies added pressure.”

The European Union (EU) reached an agreement in December on a new law that requires businesses to ensure that goods sold in the EU do not originate from forest land.

“This has sparked a response from the Council of Palm Oil Exporting Countries (CPOPC), which is led by Malaysia and Indonesia and may stop exporting to Europe,”