Derivatives Market Overview >>> FKLI and FCPO 12 Nov 2009

KLCI Futures generally closed lower, Nov and Dec contracts turned discounts

The KLCI Futures contracts for November and December turned discount again following lackluster performance of the underlying and negative leads from major regional bourses.

The November contract lost 7.0 points to 1,268.5 points, turning to a discount of 3.25 points to the cash market from a premium of 5.35 points Wednesday. The contract opened 1.0 point lower at 1,274.5 points and traded between a high of 1,275.0 points and a low of 1,262.0 points during the day.

The December contract shed 6.0 points to 1,269.5 points, representing a discount of 2.25 points to the underlying against a premium of 5.35 points Wednesday.

The March 2010 and June 2010 contracts maintained at premiums albeit at lower margins. The March 2010 contract eased 3.5 points to 1,275.5 points which is a premium of 3.75 points to the underlying while the June 2010 contract ended unchanged at 1,280.5 points, representing a premium of 8.75 points

Crude Palm Oil Ends Up On Short Covering, Flood Concerns
Crude palm oil futures on Malaysia's derivatives exchange ended higher on short covering as heavy rains in oil palm growing states may disrupt harvesting activities, trade participants said.

The benchmark January contract on the Bursa Malaysia Derivatives ended MYR10 higher at MYR2,245 a metric ton after trading in a range of MYR2,240-MYR2,277/ton.

"The weather hasn't been good. With production likely lower in November and strong export figures so far, this will give good support to prices," a senior executive from Kuala Lumpur-based trading company said.

While heavy rains in key oil palm growing areas may disrupt harvesting activities, it isn't likely that production figures will drop drastically this month, as the high output cycle isn't over.
Most mature palm trees are able to survive flood conditions for up to two weeks, but prolonged flooding can have adverse effects on oil palm yields.

Overall palm oil output in November likely to fall 5% to 1.90 million tons, a Kuala Lumpur-based senior trading executive said.

"Preliminary data from an industry association showed that production in the first 10 days posted a double-digit slowdown. But the data doesn't reflect performance for the whole month and it is too early to tell," he said.

Heavy rains have been falling regularly over the states of Kelantan, Terengganu and Pahang, and the Malaysian Meteorological Department has issued an alert saying that rains are likely to continue until next week. The weather bureau also said heavy rains in several states in peninsular Malaysia may cause floods along rivers and low lying areas.

An official at the MMD said other provinces such as Johor were also experiencing heavy rains.
Johor and Pahang are major oil palm growing states in peninsular Malaysia.

Malaysia's palm oil output in October rose 27% from the previous month to 1.99 million tons, the highest monthly output on record, data from the Malaysian Palm Oil Board showed Tuesday.
In the cash market, cash palm olein for January/February/March was traded at $710/ton, while April/May/June traded at $715/ton, $717.50/ton and $720/ton, free on board Malaysian ports, said a Singapore-based trader.
Cash CPO for prompt shipment was offered MYR40 higher at MYR2,220/ton.
A total of 15,456 lots of CPO were traded on the BMD, versus 5,092 lots Wednesday.
Open interest stood at 94,523 lots Thursday, down from 95,142 lots. One lot is equivalent to 25 tons