Malaysia’s Target : Resilience

Testing times for global economy

The theme of POC 2016 is ‘Managing Market Uncertainties: Our Global Solution’. This is relevant in the context of the global economy being expected to grow at a slower pace this year, based on the 2015 performance – the World Bank estimates that the global economy grew at 3.3% in 2015. This slowdown has had repercussions on demand for palm oil, especially from major importers such as China and the European Union.

Notwithstanding slower global economic growth, the vegetable oils industry saw growth in production, partly due to favourable weather conditions in 2014 and 2015. This was reflected in the growth of global palm oil production, which increased by 5.3% in 2015 compared to 2014. Other vegetable oils that registered production growth were soybean oil at 7.7% and castor oil at 6.3%.

Palm oil remains a highly traded vegetable oil, accounting for 57.6% of the global trade in 2015. Malaysia contributed 31% of the global palm oil production and 36.4% of exports.

However, the combination of lower global economic growth and increased supply of vegetable oils does indeed lend to market uncertainty. As such, it would be pertinent for the oils and fats fraternity to formulate appropriate measures that insulate their businesses against market-based and global challenges.

In situations of price uncertainty, price discovery is necessary for traders to mitigate risk factors. To this end – as a major producer of palm oil and home of the most successful crude palm oil futures trading platform – Malaysia offers wide-ranging investment opportunities for institutions, traders, buyers, suppliers and risk managers. Bursa Malaysia’s long years of experience in commodity futures markets constitute an important component in making it a viable and a robust exchange that should benefit all.

Another crucial component that upholds Malaysia’s standing as a leading market-place for the oil palm industry is the credibility of supply-side factors; the same can also be said of our strong and deep capital market. All these have led to Malaysia being regarded as the world’s price discovery centre for palm oil.

Malaysia, as the preferred benchmark for the pricing of palm oil globally, has attracted strong attention from international traders. The foreign trading participation for crude palm oil futures has continuously increased.

This is indeed an encouraging sign. More importantly, it reflects the level of maturity of, and access to, the Malaysian futures market. I am optimistic this will encourage more participation from overseas players in crude palm oil futures.”

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