Farah Adilla
KUALA LUMPUR: Global demand for crude palm oil is expected to improve in the second half of the year as countries worldwide continue to ease their lockdown measures, said Kenanga Futures Sdn Bhd chief executive officer Azila Abdul Aziz.
The sentiment was boosted by the announcement by the Malaysian government to restart the roll-out of its B20 biodiesel mandate in September 2020 and the Indonesian government's pledge to continue with its B30 mandate.
"Additionally, the dissipation of the animosity between Malaysia and India in recent months can improve palm oil demand to the world's second largest palm oil buyers.
"The zero export duty on palm oil related products for the rest of 2020 announced by the government will further boost trading interest in Bursa Malaysia Derivatives (BMD) CPO Futures (FCPO)," Azila told the New Straits Times recently.
Azila said for the first five months of the year, the total FCPO volume had risen to 6.3 million contracts executed, which was 64 per cent more than what was traded over the same period a year ago.
"Like most commodities, CPO is not spared from the impact of the Covid-19 pandemic. Supply chain and market demand were disrupted as many countries around the world imposed lockdown measures to curb the spread of the virus."
According to data from Malaysian Palm Oil Board (MPOB) website, total CPO exports for the first five months of 2020 was 6.1 million tonnes. This was 24 per cent less than what was exported over the same period last year.
Azila, however, said one of the core elements of trading derivatives was to hedge one's risk. Hence, in contrast to most asset classes, derivatives tend to do relatively well during times of volatility and uncertainties.
"According to Futures Industry Association survey for the first quarter (Q1) of 2020, the volume of all listed derivatives contracts traded globally has jumped 43.2 per cent year-on-year.
"Over the same period, BMD has also recorded 5.4 million contracts traded, which is almost double the amount executed in Q1 2019," she added.
Azila said while trading volume may thrive during such volatile period, it did not mean that business operations do not face any challenges during the lockdown period as we adapt to the "new normal".
Citing an example, she face-to-face meetings with clients were prohibited during the Movement Control Order period and most operations had to be done online.
"Thankfully for Kenanga Futures, most of our clients' trading activities were already performed online and they can access all our partner exchanges via our own order management system, KDF TradeActiveTM, both on desktop and mobile devices.
"Rather than Covid-19 slowing innovation down, it has accelerated the pace of change and transition towards more digital engagement and interaction," she said.
Azila said at Kenanga Futures has always been an advocate in educating and creating awareness among traders about the potential of trading derivatives.
It is also part of the company's initiative and ongoing efforts to "Build A Smart Derivatives Trading Community" in Malaysia.
Throughout the years, it had organised a regular series of educational seminars and workshops in selected cities around Malaysia.
On the digital front, it posted a lot of educational contents and fundamentals on futures on its website.
Tose who are already trading or interested to trade futures can find Kenanga Futures' daily commentaries and latest market insights on the website.
Kenanga Futures will be launching an exciting retail campaign in August where participants will be able to win attractive prizes.