Sat, 08 Aug 2009
From:
By Katherine Demopoulos in Jakarta
Indonesia is launching a commodities exchange to trade crude palm oil and other raw materials, in a fresh sign of Asian emerging countries following the path of independent projects in Singapore and Hong Kong.

In spite of being the world’s largest producer, Indonesia has been unable to set a palm oil benchmark price, with trading centred in neighbouring Bursa Malaysia in Kuala Lumpur.
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“Indonesia is the world’s largest producer [of palm oil] so it deserves to set the benchmark prices,” said Megain Wijaya, the managing director of Indonesia Commodity & Derivatives Exchange (ICDX).

The ICDX is targeting an October launch and will also focus on gold, and eventually coal, Mr Megain said. He added that the exchange also intends to trade futures in Indonesia’s currency the rupiah.

The exchange has 11 founding members all commodity traders and had received a further two membership applications so far, he said. The gold business would be more important for domestic clients, Mr Megain added.

Mr Megain said the ICDX has received permits from the Indonesian regulator, and is negotiating to provide foreign companies in Indonesia with access to the exchange.

Deddy Saleh, chairman of the Commodity Futures Trading Regulatory Agency, said the ICDX draft contracts are being reviewed, and the October target is achievable if amendments are made quickly.

Meanwhile, the launch comes as other Asian countries plan to launch commodities exchanges, including in Singapore and Hong Kong, or revamp established markets, such as in the case of the Tocom exchange in Tokyo.

China is also building up its commodities exchanges, offering new products. But in India, an initial push has had a setback as the government restricts severely the trading of agricultural futures amid rising food prices.

The Jakarta Futures Exchange, which was launched in 2000, started by offering crude palm oil and coffee futures but trading was “dormant” as operators have preferred to trade the palm oil contracts in Malaysia and coffee futures in London and New York, according to Edi Susmadi, a director of JFX. He attributed the failure to competition from Bursa Malaysia, and the low tech trading system.

Max Ramajaya at Wilmar International, the world’s largest processor of palm oil, said: “When you trade on MDEX [Bursa Malaysia] you have better access to information about the market and more insight.

“But when Indonesia [becomes] as active as MDEX ... it is better to fish in two ponds, rather than one pond.”

Meanwhile, on the Bursa Malaysia, crude palm oil prices futures have surged almost 35 per cent this year to about $666 a tonne, on the back of strong consumption in Asia, higher oil prices and the arrival of the El Nio weather phenomenon.

Additional reporting by Javier Blas in London



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