MARKET DEVELOPMENT
Elevated CPO price to stay for a while, says HLIB
Elevated CPO price to stay for a while, says HLIB
17.03.2022 (www.nst.com.my) - KUALA LUMPUR: Crude palm oil (CPO) price will remain elevated for a while possibly into end of June, if not longer, according to Hong Leong Investment Bank Bhd (HLIB).
This will be supported by palm supply disruption in Malaysia, which will likely persist into the next few months and output uncertainties on major oilseeds arising from Russia-Ukraine conflict and drought in South America.
This was in addition to the Indonesian government's recent move to raise DMO to 30 per cent, which would further tighten supply of vegetable oil in the exports market, HLIB added.
It expects palm oil output disruption in Malaysia to persist into the next few months.
"Although MPOB (Malaysian Palm Oil Board) projects CPO output in Malaysia to improve by 4.9 per cent to 19 million tonnes in 2022, this depends on timely arrival of foreign workers into Malaysian shores, and sufficient fertiliser application (which remains a big question mark, particularly among the smallholders amid fertiliser shortage)," HLIB said.
The firm maintained its 2022-2024 CPO price projections of RM4,300/3,300/3,300 per tonne for now given the fluid situation.
"Every RM100 per tonne raise in our CPO price projection will lift earnings forecasts for plantation stocks under our coverage by 3.5-15.0 per cent," it added.
HLIB also kept its "Overweight" call on the sector, with its top picks being FGV Holdingd Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Sime Darby Plantation Bhd.