22/12/2008 (The Edge Daily), Kuala Lumpur - Palm oil indices will add little value to plantation companies if they offer no incentives for palm oil players to list on the index, fund managers and analysts said.

Private equity fund KSC Sdn Bhd director Choong Khuat Hock said given that most of the well-capitalised plantation companies were already listed either in Malaysia, Singapore or Indonesia, it would be difficult to attract these companies to be listed on a new palm oil index that Bursa Malaysia Bhd planned to launch.

The local stock exchange plans to launch the FTSE Bursa Malaysia Asian Palm Oil Plantation Index in the first half of next year, to enhance the country's profile as the centre for commodity products. It is also in talks with an issuer to list an exchange-traded fund (ETF) on the index.

"The regional index will help local plantation companies benchmark their stock performances against regional plantation companies, but it is not likely to promote regional companies to list on the index," Choong told The Edge Financial Daily yesterday.

Bursa Malaysia said it would also launch a domestic index, the FTSE Bursa Malaysia Palm Oil Plantation Index in the first half of next year to allow investors to track the performance of Malaysian-listed companies with revenues derived from palm oil-related activities.

However, Choong said the domestic index might not bring significant changes to the palm oil sector, as the index would most likely skew towards large-capitalised plantation companies.

Nevertheless, he said the timing of the launching of the new indices was good, given that plantation stocks had become cheap, mainly because of the global financial crisis.

An analyst with a local research house said while the regional index could provide easier access for local investors to invest in regional plantation companies, he doubted that local investors would be highly attracted to investing via this trading platform.

"This is because it is not difficult for local investors to park their money overseas, such as the Singapore Stock Exchange," he said, adding that the indices would bring no impact to the investing community if there was no incentive to attract regional plantation companies to list on them.

At a recent FTSE Custom Index seminar, Asia FTSE Group quantitative research head Jamie Perrett said Bursa Malaysia aimed to launch an ETF that would take advantage of the market interest in commodity-based investment.

This would make Malaysia the first in the world to have an index that tracks the performances of local and regional oil palm plantation companies.

According to the data compiled by FTSE Group, the regional index would track 43 regional palm oil-related companies with a total market capitalisation of US$101.26 million (RM352.5 million) as of June 30, 2008.