Asian commodity markets ponder foreign link-ups

Asian commodity markets ponder foreign link-ups

SINGAPORE (Reuter): Commodity exchanges in Southeast Asia are eying strategic links with offshore markets to widen their base and speed up growth, but officials said no mergers were planned.

Reacting to a wave of possible mergers and tie-ups among Western markets, the officials said they were looking to launch joint contracts or introduce mutual settlement of contracts with U.S. or other markets.

"We are looking at it," Lim Toh Eng, general manager of the Singapore Commodity Exchange (Sicom), told Reuters Tuesday. "We cannot exclude the idea of having working relationships with some exchanges at some point."

Sicom, which mainly trades in rubber, recently added a Robusta coffee contract tailored along the lines of the London Commodity Exchange's (LCE) coffee contract.

Industry analysts said Asia's booming economies would open up more opportunities for hedging and arbitrage business during the region's trading time.

"The growth in the futures industry is definitely here," one Asian analyst said. "The CBOT (Chicago Board of Trade), for instance, is concerned over its static grains volume at the expense of Chinese and Japanese exchanges.

"There will be more link-up arrangements between Western and Asian exchanges as this will benefit both of them," he said.

Kuala Lumpur Commodity Exchange (KLCE) chief executive Syed Jabbar Shahabuddin said the Malaysian exchange was exploring the idea of establishing joint cooperation but stressed that any marriage should be mutually beneficial.

"We are always open to the idea," he said. "But in any joint ventures, two parties must be convinced that they will benefit."

Industry sources said the KLCE planned to work jointly with New York's Coffee, Sugar and Cocoa Exchange Inc (CSCE) to develop the Malaysian exchange's cocoa contract.

Among the latest merger news, the CSCE revealed two weeks ago it was pursuing a takeover bid for the LCE.

The New York Mercantile Exchange (NYMEX) has separately proposed consolidation or merger with the CSCE. But CSCE officials said this week further discussions on consolidation with NYMEX must include the New York Cotton Exchange.

Plans

Malaysia's KLCE now relies solely on its flagship crude palm oil (CPO) contract. Syed Jabbar said in April the KLCE was studying plans to set up a regional lauric oil futures market.

He said the KLCE was discussing issues such as delivery problems, and options for cash settlement with Indonesia and the Philippines, the world's major coconut oil producers.

He also said the KLCE and China's Commodity Futures Exchange (CCFE) were discussing mutual hedging cooperation.

"They (Chinese traders and consumers) have a choice of the palm oil futures contract on the CCFE or the CPO futures traded on the KLCE," Syed Jabbar told Reuters recently.

Patrick Poon, vice-president of the Manila International Futures Exchange (MIFE), said it had opened talks with the CBOT on the possibility of facilitating mutual settlement of contracts in the two exchanges.

MIFE trades in a wide range of commodity and financial derivatives.

Elsewhere in the Asia-Pacific region, the Sydney Futures Exchange is negotiating with the Tokyo Grains Exchange about setting up a grain-fed cattle contract early in 1996.