Malaysia pioneered the world’s first automated commodities trading platform — Bursa Suq Al-Sila — last August. Since then, despite its enhanced capability to handle multi commodities in different currencies, it has limited its transactions to crude palm oil (CPO).
Having enjoyed considerable growth with wider acceptance in international markets, the Bursa Malaysia is currently looking at all possibilities to expand Bursa Suq Al-Sila’s commodity portfolio by introducing metal and rubber trading as well as new specifications of CPO.
Addressing the recently held Palm and Lauric Oils Conference and Exhibition 2010, Bursa Malaysia’s global head of Islamic markets, Raja Teh Maimunah, said when revealing the plans: “In the Bursa Suq Al-Sila concept, the bank buys a commodity directly from the supplier such as a CPO producer at the market rate and sells it to a customer at a profit.
“Currently one specification of CPO is traded at Bursa Suq Al-Sila and we are looking at introducing new specifications. We are also looking at metal and rubber trading which will perform well. We believe that these steps will help Malaysia to further strengthen its position as the leading Islamic financial center in the world.”
According to industry sources, the world market dependence on palm oil is expected to increase, projecting 2.7 million tons in consumption this year. The European Union alone is expected to witness a 0.3 million tons increase in consumption, China by 0.6 million tons and India by 0.5 million tons.
In order to satisfy this demand, world exports of palm oil are forecast to increase by 1.4 million tons to a record 36.8 million tons in October to September in 2009/10, thus accounting for 63% of world exports of all major vegetable oils. With this growing demand the Bursa Suq Al-Sila would have more transactions and more widely used among Shariah compliant traders.
“The opening price for CPO is benchmarked against previous day’s trading which makes it difficult to manipulate. Currently, I am not in a position to disclose the trade volumes or the value of the transactions executed automatically at the Bursa Suq Al-Sila. However, we are confident that business will continue to grow with the proposed changes,” Raja Teh added.