Dalian Commodity Exchange, one of country's three futures bourses, is considering introducing palm oil futures, a move that it said would help the industry hedge risks and strengthen its position as the country's leading agricultural futures bourse.
The exchange yesterday signed a Memorandum of Understanding (MOU) with Bursa Malaysia, a Malaysian stock and futures exchange, revealing that it is working on the palm oil futures addition.
Under the agreement, the two bourses will co-operate in areas ranging from derivatives products development to information exchange to personal training.
In particular, Bursa Malaysia will provide assistance and expertise to the Dalian bourse in its research on the proposed palm oil futures product.
"The signing of the MOU with Bursa Malaysia indicates that Dalian Commodity Exchange is accelerating its work on the palm oil futures product," the exchange said in a statement.
Bursa Malaysia, founded in 1965, is the largest palm oil futures market in the world.
"We hope the co-operation with Bursa Malaysia will quicken our pace on palm oil futures," said Wang Weijun, spokesman of the Dalian Commodity Exchange.
Analysts say the introduction of palm oil futures could provide a timely tool for traders and industrial users to hedge risks, as the import of palm oil is expected to rise in the country.
Palm oils are widely used in food industries.
India, China and Malaysia and Pakistan are the world's major palm oil consumers, accounting for about 60 per cent of the world's total consumption.
It is estimated that China consumed about 4.2 million tons of palm oil last year.
China imported about 4 million tons of palm oil last year, a figure that is expected to rise this year as the import quota on the oil has been removed, according to industry players.
In line with its commitment upon entry to the World Trade Organization (WTO), China has scrapped its quota system on palm oil imports beginning this year.
"With the removal of the quota system on palm oil imports, China's palm oil import is set to soar," said Xia Yunlong, an analyst at Jiangsu Holly Futures Brokerage Co Ltd.
"The introduction of palm oil futures then makes sense as traders and industrial users need such an instrument to hedge the risks," said the analyst.
"The proposed palm oil futures, if approved and traded, would certainly strengthen our position as the leading agricultural futures exchange in the country," Wang said.
The spokesman said there is no timetable for when the palm oil product will be officially approved and traded.
Dalian Commodity Exchange, the largest agricultural commodities futures exchange in the country, already trades corn, soybeans, soymeal and soy oil futures.
The Dalian bourse, located in Northeast China, last month also proposed to trade pig and paddy futures to help farmers hedge the fluctuating prices risks.
(China Daily 04/06/2006 page9)
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