09/01/2013 (The Star) - Plantation stocks fell as sentiment turned cautious, tracking the decline in crude palm oil (CPO) prices on concerns over demand.

CPO for third-month futures fell RM24 to RM2,394, the lowest since Dec 21 ahead of key industry data later in the week.

Bloomberg reported: “Palm oil dropped to the lowest level in more than two weeks on signs that buyers in China built up the biggest-ever stockpiles before the largest cooking oil consumer tightened rules on edible oil imports.”

The wire also said stockpiles in Malaysia were 2.53 million tonnes in December compared with the record 2.56 million tonnes in November, according to the median of estimates from six analysts and two plantation companies it surveyed.

It was also reported that palm oil inventory at major ports in China climbed to a record 1.1 million tonnes on Monday.

At the beginning of the year, China had imposed more stringent rules on edible oil imports to improve food-safety standards.

An analyst contacted by StarBiz said 95% of Malaysian palm oil was compliant with the rules.

“It is not too big of an issue one might expect,” he said, noting that a bigger concern would arise if other countries follow suit and started to impose regulating measures too.

Nonetheless, the 5% of local palm oil which are not compliant with China's Inspection and Quarantine Bureau's tighter requirements would impact as much as 175,000 tonnes of palm oil exported from Malaysia.

“We still think that stockpile starts easing as production is at a seasonal downcycle. Production usually soften in the January-to-May period,” the analyst said, adding that CPO prices might see some upside as stockpiles ease.

He said most palm oil stocks rose on Monday and the drop would only erase some gains.

Plantation stocks are among the top losers in the broader market as CPO futures slumped on concerns of China's rising stockpiles.

The FBM KLCI was down 0.31% while the plantation index fell 1.25%.

IOI Corp Bhd declined 14 sen, dragging the KLCI down 2.07 points while Kuala Lumpur Kepong Bhd fell 32 sen to RM22.62, contributing a loss of 0.53 point to the KLCI.

Genting Plantations Bhd lost 20 sen to RM8.89, PPB Group Bhd was down 14 sen to RM12.88 and Negri Sembilan Oil Palms Bhd declined 12 sen to RM5.68.

Heavyweight Sime Darby shed four sen to RM9.61.

Meanwhile, Reuters reported that traders would be looking to see if major palm oil buyers from China and India would increase purchases due to the lower export tax.