Published May 19, 2009

Palm oil plantation indices unveiled

Two of Bursa's three new indices are Asian based and include Singapore planters

By PAULINE NG
IN KUALA LUMPUR

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TO further promote the local bourse as a key centre for commodities, Malaysia's stock exchange operator has launched three new palm oil plantation (POP) indices, two of which are Asian based and include Singapore planters.

Mr Yusli: The three indices launched by Bursa include the world's liquid and large-cap companies

The set of three indices, which include the world's liquid and large-cap companies, would allow investors to track the performance of listed firms that derive substantial revenues from palm oil-related activities, said Bursa Malaysia chief executive Yusli Mohamed Yusoff yesterday.

He was speaking at the launch of the FTSE Bursa Malaysia Palm Oil Plantation Index in Ringgit, and two other Asian palm oil plantation indices, one based in ringgit and the other in US dollar.

As the world's second largest palm oil producers, Malaysian planters constitute the bulk or 61 per cent of the indices, its palm oil giants IOI Corporation and Sime Darby leading the 18-constituent Asian POP Indices with a near weighting of 18 per cent each.

Wilmar International is Singapore's top planter in the Asian indices with a weighting of slightly over 17 per cent, the other three firms being Golden Agri-Resources, Indofood Agri Resources and First Resources.

Indonesia, the world's largest palm oil producer, has three planters in the tradable indices.

Bursa said constituent firms must meet certain criteria, including a market capitalisation of more than US$100 million, and more than a quarter of revenue should be derived from palm oil activities.

In recent years, the local bourse has promoted itself as a key platform for Islamic as well as palm oil-related offerings in an effort to differentiate itself from its competitors.

The new indices would bring more attention to the opportunities available in the palm oil sector and on the companies, which already have a following internationally, said Mr Yusli.

They would also complement and offer a platform for growth of palm oil plantation-related capital market products such as exchange-traded funds and other structured products spanning across the equities, derivatives and commodity markets.

'This move strengthens our CPO futures market as it is between the cash and derivatives markets for hedging and arbitraging opportunities,' Mr Yusli said, adding that the exchange is looking to introduce a new futures product that would ride on the POP indices.

Because they have outperformed the market, palm oil companies have been an investor favourite, and are expected to continue to be favoured given the rising bullishness on the sector.

Some analysts have projected palm oil futures would breach the RM3,000 (S$124) per-tonne level soon on Asian demand owing to lower inventories and softer output.

According to Bursa's three-years back cast of the new indices, the POP indices outshone the benchmark Kuala Lumpur Composite Index by more than 39 per cent.