On January 22,2021, the introduction of foreign traders to participate in DCE’s RBD palm olein futures trading celebrated its "full month". Over the past month, with the support and care of all participants in the domestic and overseas markets, the market has been running smoothly and orderly and the market scale has been stable. The participation of foreign clients is relatively active and all participants provide good feedback.
As the first listed agricultural futures in China to be opened to the outside world, the participation of foreign traders in RBD palm olein futures has attracted much attention. As of January 21, about 40 foreign clients have participated in RBD palm olein futures trading in just one month. Statistics show that the overall operation of RBD palm olein futures in the first month of internationalization has been stable, with futures price fluctuating at a reasonable level. In terms of trading, the cumulative trading volume of RBD palm olein futures in the first month of internationalization was 20.166 million lots (unilateral, same below), with a turnover of 1.4 trillion yuan and an average daily open interest of 447,000 lots; the average daily open interest of institutional clients accounted for 59.2%, an increase of about 5% compared with that of November 2020. In terms of price operation, the active contract of RBD palm olein futures closed at a high of 7,296 yuan/ton and a low of 6,528 yuan/ton, with little volatility, which means the internationalization business achieved a smooth transition.
The market analysts stated that the price trend of RBD palm olein futures in recent months is in line with the trend of the spot market, and the futures prices are good indicators. "From the fourth quarter of 2020 to the first quarter of 2021, Malaysian spot goods inventory are at a seasonal low, which supports the palm oil price. However, the MPOB report released on January 11 suggested that, Indonesian spot goods inventory started to accumulated and the demand for palm oil in Malaysia started to weaken, which leads to the decreasing price of palm oil. As for the DCE RBD palm olein futures market, the main contract P2105 reached a highest point of RMB 7,356/ton on January 11, then the price fell back to RMB 6,468/ton on January 20. Overall, the DCE RBD palm olein futures price movements reflect the changes in market fundamentals relatively well."
It is understood that global RBD palm olein trade prices fluctuate frequently due to a combination of domestic and international factors, and overseas industrial clients also have hedging needs. The participation in the world's largest RBD palm olein futures market has become a new path for relevant overseas industries clients to hedge market risks.
China Merchant Foreign Trade (Singapore) Limited, a global agricultural trading company, participated in the P2105 contract at the beginning of the internationalization of RBD palm olein futures. The company's Managing Director said that the company mainly exports palm oil to China and needs to hedge the price risk of the terminal sales area. So the company participated in the trading in the first time after the DCE RBD palm olein futures were opened to the overseas traders, in order to get familiar with the trading process and rules as soon as possible, which help to lay the foundation for future participation in hedging business. "After the internationalization of RBD palm olein futures, foreign companies can open accounts and trade directly, and funds are able to enter and exit freely, providing companies with a larger and more active risk management platform." He said.
In addition, the MD of the Malaysian oil processing company involved in the RBD palm olein transaction also said that for RBD palm olein processing companies whose products are sold to China, DCE RBD palm olein futures can provide a risk management tool with good liquidity and price transparency. "We can lock in profits through trading in both the BMD and DCE markets, while the DCE RBD palm olein futures market is liquid and efficient, which helps us hedge at a lower cost," he said.
It is understood that in order to enable foreign investors to better understand the trading habits of the China’s futures market, a number of futures companies and overseas intermediaries jointly held online meetings to explain the trading rules of the DCE RBD palm olein futures market, from the five-in-one regulatory system of China's futures market, to various business management practices, rules for RBD palm olein futures varieties, and specific arrangements for various businesses such as funds deposit and withdrawal, trading and settlement, which provided overseas intermediaries with comprehensive, detailed and customized investment education services to enable them to fully understand the institutional arrangements of China's futures market and to smoothly carry out domestic RBD palm olein futures trading.
In addition, members and banks and other financial institutions also provide a full range of services to foreign clients in terms of technology and fund settlement. "After understanding the actual needs of overseas clients, we assisted overseas intermediaries and software vendors to develop software functions that are adapted to the trading habits of overseas investors, such as 'automatic position hedging', so that they can trade futures with a net position trading logic."
"In terms of fund transfer and settlement and foreign exchange sale and settlement, we have cooperated with Bank of China to open the function of bank-futures funds transfer for clients as early as possible. In addition, as the RMB exchange rate has been fluctuating greatly recently, we have dedicated staff to communicate with overseas intermediaries in real time to ensure that the currency exchange is completed at the first time, so that the actual exchange result for clients is as consistent as possible with the foreign exchange quotation."
Market analysts pointed out that it was the market participants that vigorously promoted account opening and overseas market promotion, laying the foundation for the smooth transition of international business of RBD palm olein futures.
The relevant person in charge of the DCE said that the introduction of foreign traders to participate in RBD palm olein futures trading is a positive action of China's capital market to practice a high level of opening up to the outside world, and is also a practical action based on the large domestic cycle to promote a dual domestic and international cycle pattern. The smooth opening of RBD palm olein futures market to the outside world is a useful exploration to promote further opening of the crop oil products futures market to the outside world. With China's economic growth and industry changes, crop oil products have gradually become one of the industries with the highest degree of openness, the fiercest competition and the strongest linkage between domestic and foreign markets. There is a growing demand from the industry for opening up other futures products in this sector. Next, DCE will continue to promote the opening of more varieties such as soybean meal, soybean oil and other varieties to the outside world, to further enhance the international influence of China's futures market, to play the price discovery and risk management functions of crop oil products, so that more China’s prices will be applied in the global trade system.
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