Bursa Malaysia Derivatives completes first physical delivery of East Malaysia Crude Palm Oil Futures in Sabah

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According to Bursa Malaysia Derivatives chief executive officer Samuel Ho Hock Guan, Bursa Malaysia Derivatives Bhd has completed the first physical delivery of its East Malaysia Crude Palm Oil Futures Contract (Fepo) in Sabah on February 17, 2022. The delivery saw a total of eight contracts, representing 200 tonnes of crude palm oil (CPO) transacted between the seller, Green Edible Oil Sdn Bhd, and the buyer, Kunak Refinery Sdn Bhd at one of the approved Port Tank Installations in East Malaysia, namely in Sandakan, Sabah. The Port Tank Installation is operated by Sawit Bulkers Sdn Bhd, a wholly-owned subsidiary of Sawit Kinabalu Group, which is the premier investment arm of the Sabah state government in the oil palm industry. The successful and orderly completion of the first physical delivery for Fepo contracts demonstrates the demand from Sabah producers to sell their CPO through an alternative platform with greater price transparency. The Fepo contract benefits Sabah refiners and buyers by allowing them to source CPO at competitive pricing. It also enables them to manage price risk and hedge against unfavourable price movement in the physical market, especially during the low-supply season. Meanwhile, Sawit Kinabalu group managing director Datuk Bacho Jansie said the availability of Bursa Malaysia Derivatives’ Fepo contract provides East Malaysia market participants with an additional trading opportunity as well as an improved price discovery mechanism and more physical delivery options in Sabah and Sarawak. He added that as one of the designated delivery ports in Sabah, he hopes to attract more market participants to lease out their available tanks and further increase the visibility of the East Malaysia palm oil market. The Fepo contract, which went live on October 4, 2021, provides East Malaysia CPO market participants with a new avenue to engage in physical deliveries and hedge their positions in the physical CPO market. It also strengthens Bursa Malaysia Derivatives’ Palm Complex offerings and provides price transparency in the East Malaysia CPO market, further cementing Malaysia’s position as the global centre for palm oil price discovery. From its launch date to February 8, 2022, Bursa Malaysia Derivatives recorded a total trading volume of 3,250 contracts which is equivalent to 81,250 tonnes of CPO. Its highest daily trading volume was recorded on January 5, 2022, at 122 contracts representing 3,050 tonnes of CPO. 

Growth momentum expected to be hampered – Moody’s  

According to Moody’s Investors Service in the latest update to its Global Macro Outlook for 2022-23 report, declining fiscal support, tighter monetary policy and waning pent-up demand will weigh on growth momentum in most countries. Although it expects the rapid rise in inflation in recent months to subside, the steep and broad-based increase in prices is eroding household purchasing power and could weaken the recovery. The global economy is transitioning from a tentative recovery toward more stable growth, bolstered by improvement in the Covid-19 health situation. The current economic cycle is remarkable in the swiftness with which activity has been restored in most major economies. The Group of 20 (G20) economies is expected to collectively expand 4.3 per cent in 2022, down from 5.9 per cent in 2021 yet still above long-term trend growth. Global growth will further slow to 3.2 per cent in 2023 as pandemic-fuelled output losses have been largely recouped and labour markets in advanced economies approach a full recovery. The agency also predicted a challenging first half of 2022, with elevated commodity prices, demand-supply imbalances, inflation pressures, volatile financial markets and geopolitical tensions. However, demand-supply distortions is expected to resolve over 2022, with supply bottlenecks easing in the second half of the year. 

AmInvest launches Asia ex Japan Equity Fund 

According to AmBank group CEO Datuk Sulaiman Mohd Tahir, AmInvest has launched its Asia ex Japan Equity Fund, which offers investors potential long-term capital growth by investing in a diversified portfolio of stocks in the Asia region (excluding Japan). The fund will feed into the Baillie Gifford Worldwide Asia ex Japan Fund, which aims to provide above average returns over the long term by investing in the fastest growing stocks in the Asia region excluding Japan. The target fund invests in companies that are financially sustainable in the long run, and takes into consideration factors such as high quality growth businesses that enjoy competitive advantages in their marketplace, environmental, social and governance matters. According to AmInvest chief executive Goh Wee Peng, the fund is a beneficiary of structural drivers that will continue to support strong growth prospects in China and the broader Asia Pacific region. This is the second fund partnership with Baillie Gifford, the target fund’s investment manager, who also manages the target fund for the Sustainable Series – Positive Change Fund. Baillie Gifford have over 30 years of experience managing Asian region equities. Since its inception in February 2020 until to date, the target fund has returned 36.2% and beaten its benchmark by 23.4%. There should be material growth for the fund, as there are more than 3 billion consumers across Asia with a notably large consumer market within the rising Asian middle class. Pre-pandemic data from International Monetary Fund predicts that the per capital spending power of Chinese consumers will nearly double in US dollar terms over a five-year period from 2019 to 2024. Digital penetration and technological change continue to be the key themes for long-term growth opportunities in Asia. Rapid development of technology is creating a fundamental change in market behaviours, with digitalisation driving changes in economic and political systems, businesses, consumer habits and behaviours. The target fund actively seeks companies that may have underappreciated growth and those constantly reinvesting for the long-term, either in research or development of capital projects. The fund’s base currency is US dollar. It is being offered for subscription to sophisticated investors in US dollar, ringgit and in ringgit-hedged classes at the initial offer prices of US$1 and RM1 per unit respectively during the initial offer period until March 23, 2022. AmInvest is the brand name for the fund management business of AmFunds Management Bhd and AmIslamic Funds Management Sdn Bhd. 

Local institutions placed emphasis on importance of ESG-compliant investments — Bursa 

According to Bursa Malaysia, local institutions placed emphasis on the importance of environmental, social and corporate governance (ESG)-compliant investments. Malaysia’s key institutional investment managers and asset owners — such as the Employers Provident Fund (EPF), Khazanah Nasional Bhd and Retirement Fund (Incorporated) (KWAP) — had participated in and signed the United Nations Principles for Responsible Investment in 2019. These institutions have incorporated the ESG mandate into their funds. The EPF is also expected to announce a sector sustainability policy framework as guidance for its future investments that will comply with ESG practices. Citing IHS Markit’s filings up to Feb 7, 2022, the regulator said the local ESG-mandated funds had a total holding value of US$118 billion (about RM494.01 billion) in stocks with good ESG ratings. The filings also showed that the fund houses ranked the highest in terms of the total holding value of stocks with good ESG ratings and accounted for 92% of the total holding value of the stocks. With the change in investment fundamentals within the industry, large-scale investment banks are also pivoting their strategies in tandem with the rise of sustainability consciousness. For instance, in December last year, Maybank Investment Banking Group announced that it would prioritise ESG and help its clients to identify green opportunities. ESG investing is one of the fastest-growing trends in the investment community over the past few years. ESG is slowly becoming a key consideration for investors. Asset owners such as pension funds are increasingly demanding sustainable investing strategies from their asset managers. Bursa, in quoting IHS Markit’s fillings up to Feb 7, said there were 235 ESG-mandated funds globally that had invested in Bursa as an exchange with a total holding value of US$143.5 billion (about RM600.76 billion). 44% of the funds (excluding Malaysia) were from North America, followed by Europe at 27%, Asia at 26% and the Middle East at 3%. 

Eye On The Markets 

This week, on Friday (25Feb), the Ringgit opened at 4.1985 against the USD from 4.1880 on Monday (21Feb). Meanwhile, the Ringgit was 3.1004 to the Sing Dollar on Friday (25Feb). On Monday (21Feb), the FBM KLCI opened at 1601.66 As at Friday (25Feb) 10:00am, the FBM KLCI is down 11.62 points for the week at 1590.04. Over in US, the overnight Dow Jones Industrial Average closed up 92.07 points (+0.28%) to 33,223.83 whilst the NASDAQ added 436.10 points (+3.34%) to 13,473.58.  

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