Sat, 16 Dec 2000

First RI futures exchange starts trading

JAKARTA (JP): After months of delay, Indonesia's first futures exchange, the Jakarta Futures Exchange (JFX), finally launched on Friday its first trading day on coffee robusta and olein.

JFX president Hasan Zain Mahmud expressed confidence that JFX would strive on the potential of the local commodity markets and the demand for a hedging facility in Indonesia.

"The opportunities are enormous and now the doors are open," Hasan told reporters following the opening ceremony of JFX, which was attended by Minister for Industry and Trade Luhut Pandjaitan.

Hasan said that in the initial step, JFX expected to test the market and simply make known to other commodity futures markets of its existence.

"There will be a grand launching once we are sure that the bourse is running well and that transactions are proceeding smoothly," he said.

JFX began trading with 12 brokerage companies and 10 traders, all of whom just recently received their operation permits from the Commodities Futures Exchange Supervisory Board (Bappebti).

The exchange itself received its permit only in late November from Bappebti,

JFX was established in August 1999 and should have began trading in March, but computer installation problems and incomplete operational requirements forced the exchange to postpone trading several times.

Hasan said that JFX was targeting transactions worth an average of 300 lots a day for each of the two commodities.

Under a coffee futures contract, each lot weighs five tons and carries a price of about US$600 per ton, depending on the market.

For olein futures contracts, each lot weighs 20 tons and carries a price of about Rp 2,500 a kilogram, depending on the market.

He said that the higher the production of commodities were, the greater the need for hedging their prices, thus raising JFX's transactions value.

Prices of coffee and olein, he said, were highly volatile partly because they were perishable products and their quality depended on weather seasons.

Price fluctuation risks cannot be accommodated elsewhere but at the JFX, he explained.

"There are risk insurances, but not for prices," he said.

He said that hedging oil prices, for instance, would help the government meet its budget targets.

Hasan said that for the grand launching, he expected that new commodities could be made available for the bourse.

As for now, he said, the government had issued a presidential decree on four additional commodities, plywood, chocolate, pepper and rubber.

Outside the four commodities other products were being considered, such as gold and currency hedging, he added.

He said the target was that by mid 2001, JFX could offer new commodities.

"It will depend on the demand from the market," he said.

Hasan said that a study would precede any introduction of new commodities or products.

As for traders and brokerage companies, he expected them to grow in numbers as new products would be introduced.

Aside from the JFX, another group of commodities traders were planning to open a futures commodities exchange for the trading of rice, sugar, soybeans, tobacco and cotton.

But Bappebti could not issue an operating permit for the second exchange, because the commodities proposed for trading had yet to be approved under a presidential decree. (bkm)