KL's commodity, monetary markets merge<\/p>\n
KUALA LUMPUR (Bloomberg): Malaysia's Kuala Lumpur Commodity
\nExchange and the Malaysia Monetary Exchange Bhd. will merge Nov.
\n2 to form the Commodity & Monetary Exchange of Malaysia, or
\nComex.<\/p>\n
The new entity will trade crude palm oil futures and Klibor
\ninterest rate futures to capitalize on lower costs and the inflow
\nof ringgit expected back in the country from now to Oct. 1, said
\nZaha Rina Haji Zahari, deputy chairman of the Kuala Lumpur
\nCommodity Exchange. She is also the director of commodities
\nbrokerage Sri Comm Options & Futures (M) Sdn. Bhd.<\/p>\n
Malaysia's central Bank announced a slew of capital controls
\nSept. 1, saying that Malaysians who hold ringgit overseas have a
\nmonth to return it to the country.<\/p>\n
\"The merger makes a lot of sense because it doesn't warrant
\nthe cost of running three futures exchanges,\" she said. The other
\nfutures exchange is the Kuala Lumpur Options & Financial Futures
\nExchange, or Kloffe.<\/p>\n
When the merger idea first came up in April, there were plans
\nto list at least three types of derivatives, including a new palm
\nkernel oil futures contract denominated in U.S. dollars.<\/p>\n
\"But when the government said (Sept. 1) they were going to peg
\nthe ringgit, we threw the palm kernel futures contract out,\"
\nbecause a fixed currency negates the need to hedge, said Zaha
\nRina.<\/p>\n
Malaysia's central bank last week set the ringgit rate at 3.80
\nto the dollar. It also said that effective immediately sellers of
\nMalaysian securities will have to keep ringgit proceeds of those
\nsales for 12 months before conversion to another currency,
\neffectively locking foreign investors into the market for a year.<\/p>\n
This has deterred foreign investors from trading on Malaysian
\nexchanges. On the Kuala Lumpur Commodity Exchange for instance,
\nforeign investment in crude palm oil futures - which account for
\n20 percent of total turnover -- has virtually dried up.<\/p>\n
Zaha Rina said the two futures exchanges, however, can still
\ncount on domestic investors, unlike Kloffe, which has seen a
\nsubstantial chunk of overseas investors disappear following the
\ncapital controls.<\/p>\n
\"Why would anyone now want to trade on Kloffe when you have no
\nrestrictions elsewhere like Simex\" in Singapore? Zaha Rina said<\/p>\n
By imposing the capital controls, Malaysia is effectively
\nhanding its clients \"on a silver platter to Simex,\" the Singapore
\nInternational Monetary Exchange, a direct competitor.<\/p>\n
Kloffe and the Kuala Lumpur Stock Exchange consolidated
\noperations in July.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/kls-commodity-monetary-markets-merge-1447893297",
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"sponsor": "Okusi Associates",
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