JFX craves more commodities<\/p>\n
By Berni K. Moestafa<\/p>\n
JAKARTA (JP): One month since its debut, the Jakarta Futures
\nExchange (JFX) has already voiced concern over its immediate
\nprospects, as trading on just a few commodities is not enough to
\ncover the bourse's expenses.<\/p>\n
JFX director Rico Menayang said that the JFX needed to
\nintroduce new commodities to replenish its depleting start-up
\ncapital.<\/p>\n
"Make no mistake, trading on coffee (robusta) and olein is not
\nenough to save the bourse," Rico told The Jakarta Post on
\nSaturday.<\/p>\n
Indonesia's first futures exchange introduced robusta coffee
\nand olein as its initial commodities.<\/p>\n
The JFX just opened last month after a series of failed start-
\nups caused first by technical and then administrative problems.<\/p>\n
Rico said the bourse lost more than Rp 1 billion (about
\nUS$105,000) because of the delays, with monthly fixed costs
\namounting to Rp 350 million.<\/p>\n
"We started with a capital of around Rp 11 billion, what's
\nleft now is about Rp 6 billion," he said.<\/p>\n
He said that even if trading volume for robusta coffee and
\nolein reached their targeted level, the JFX would still suffer
\nlosses.<\/p>\n
Although trading on coffee robusta and olein was lucrative, he
\nsaid the bourse needed additional commodities to stimulate the
\nfutures market and prevent an early shutdown.<\/p>\n
"The market wants financial commodities; there is a huge
\ndemand out there," Rico said.<\/p>\n
According to him, trading on foreign currencies tops the list
\nof interested financial commodities here.<\/p>\n
He said the market needed alternative hedging facilities, in
\nparticular for the U.S dollar. "Just ask treasury bankers, they
\nknow what's missing in the market," he added.<\/p>\n
The rupiah's steep fall during the economic crisis was among
\nthe triggers that deflated the country's banking sector.<\/p>\n
Now erratic politics and a shaky economic recovery make it
\ndifficult to stabilize the rupiah.<\/p>\n
JFX, Rico went on, would profit formidably from banks wanting
\nto contain foreign exchange risks.<\/p>\n
He said that JFX must offer the most favorable foreign
\ncurrencies, namely those from countries with which Indonesia has
\nclose trade relations.<\/p>\n
But Rico expressed disappointment over the slow process
\nthrough which the government was handling the bourse's appeal for
\ntrading financial commodities.<\/p>\n
The Commodities Futures Exchange Supervisory Board (Bappebti),
\nhe said, lacked aggressiveness to promote the trading of
\nfinancial commodities.<\/p>\n
Rico said that Bappebti must first gain the approval of the
\nfinance ministry and Bank Indonesia before the government issued
\na trading permit on financial commodities.<\/p>\n
"They (Bappebti) are reluctant to approach the finance
\nministry and the central bank, on fears that it might create
\nconflict," he said.<\/p>\n
There is too much politicking between these government
\ninstitutions, he said.<\/p>\n
He added that the government had recently replaced the head of
\nBappebti.<\/p>\n
Bappebti's former head, Arifin Lumban Gaol, gave up his
\nposition to Ridwan Kurnaen, who had been the board's secretary,
\nhe said.<\/p>\n
Rico also questioned the need for a presidential decree for
\neach different commodity to be traded on the futures market.<\/p>\n
"Why must a president involve himself in such detailed
\nmatters? Isn't it enough to have one decree covering all general
\ntrading commodities?" he said.<\/p>\n
To date, the government has issued a presidential decree on
\nfour additional commodities, namely plywood, chocolates, pepper
\nand rubber.<\/p>\n
JFX president Hasan Zain Mahmud has said he expects the bourse
\nto trade the new commodities by mid-2001.<\/p>\n
But in the first month since JFX opened, trading on olein and
\nrobusta coffee remained dormant, with this year's successive
\nfestive seasons allowing the bourse only two weeks of trading.<\/p>\n
Rico is nevertheless upbeat that trading will pick up next
\nweek, as traders and investors will return to work after the
\nholidays.<\/p>\n
He expected average trading volume for both coffee and olein
\nto soon climb back to its preholiday level of 20 to 30 lots.<\/p>\n
JFX's coffee futures contract sets one lot at five metric
\ntons, with a price of about $600 per ton, depending on the
\nmarket.<\/p>\n
Whereas under the olein futures contract, each lot weighs 20
\ntons and carries a price of some Rp 2,500 per kilogram, depending
\non the market.<\/p>\n
Despite some worries about the JFX's immediate future, Rico is
\noptimistic about the bourse's long-term prospects.<\/p>\n
"Indonesia has huge potential for a futures market, because it
\nis both a commodity producing country and a consuming country,"
\nhe explained.<\/p>\n
He said that in a country that produces commodities that have
\npotential for the futures market and that consumes a vast amount
\nof the commodities, the bourse was likely to be strong since
\nsellers and buyers actively participated.<\/p>\n
"This is unlike Singapore, which is just a trading country,"
\nhe said.<\/p>\n
According to him, Singapore's commodity exchange has not been
\ndoing so well, because being a trading country it relies more on
\ninvestors whose activities have been low lately.<\/p>\n
"Despite all its high tech and its international links,
\nSingapore cannot attract investors to trade," he said.<\/p>\n
The Singapore Commodity Exchange (Sicom) is one of the oldest
\nexchanges for the commodity futures market in this region.<\/p>\n
JFX was established in August 1999. It was scheduled to begin
\ntrading in March, but computer installation problems and
\nincomplete operational requirements forced the exchange to
\npostpone trading several times.<\/p>\n
The bourse started trading with 12 brokerage companies and 10
\ntraders, all of whom just recently received their operation
\npermits from Bappebti.<\/p>\n
The JFX also has many weaknesses, Rico went on to say.<\/p>\n
Among them, he said, was the country's political uncertainties
\nthat made investors uneasy.<\/p>\n
Another problem was the lack of publicity to lure more
\ninvestors, he said.<\/p>\n
The JFX will soon hold a road-show to tap domestic investors
\nin major cities like Surabaya, Bandung, Medan.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/jfx-craves-more-commodities-1447893297",
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