KUALA LUMPUR, June 13: Malaysian crude palm oil futures ended 3.4 per cent lower on Wednesday, pulled down by the exchange regulator's new measures to curb speculative trading.
Dealers said the market, which plunged more than 8 per cent during the morning session, recovered because of strong buying.
The benchnmark third-month August contract on the Bursa Malaysia Derivatives Exchange finished down 83 ringgit, or 3.4 per cent to 2,350 ringgit ($677) a ton, after touching an intraday low of 2,235 ringgit.
Bursa Malaysia raised gross margin rates on all contracts, prompting concern among traders that new measures will make hedging more expensive.
The market is now at a near meltdown because of these regulations, said a trader. Players feel that they will be at a disadvantage over the higher gross margin rates. Bursa Malaysia increased the gross margin rates for the spot month crude palm oil and palm kernal oil contracts to 7,000 ringgit a lot of 25 tons each from 4,900 ringgit, an exchange official said.
For other months, it raised the margin rates to 6,750 ringgit a lot from 4,800 ringgit. The new rates take effect from Thursday.
Dorab Mistry, a director of Godrej International Limited, said palm oil prices are expected to trade between 2,200-2,400 ringgit a ton over the next one month.
The market has done enough for the time being. It did an excellent job of killing the demand but now we are in danger of an overkill, Mistry told Reuters in an interview.
A fair value based on current fundamentals for the third-month position in my opinion should lie between 2,200 and 2,400, he said.
Traders said Mistry's comments could help to stablise the market, which has lost nearly 15 per cent since it hit record highs of 2,764 ringgit last week.
The comments will help get rid of this volatility which is not good for the market in the long-run, said a leading trader.
Other traded months fell between 22 and 149 ringgit, except the March 2008 contract which was up 24 ringgit. Overall trade more than tripled to 37,231 lots of 25 tons each.
September palm oil on Singapore's Joint Asian Derivatives Exchange (JADE) fell $39.00 to $643.00 a ton.
Exports of Malaysian palm oil products for June 1 to 10 fell 27 per cent to 339,117 tons from 463,865 tons shipped between May 1 and 10, cargo surveyor Intertek Testing Services said on Monday.
Another cargo surveyor, Societe General de Surveillance, said exports during the period fell 23.5 per cent to 345,849 tons.
In Malaysia's physical market, crude palm oil for June shipment in the southern region was quoted at 2,430/2,450 ringgit a ton. Trades were done between 2,420 and 2,450 ringgit.—Reuters
