MARKET DEVELOPMENT
Plantations Advance as CPO Prices to Climb
Plantations Advance as CPO Prices to Climb
06/09/2013 (The Star) - Plantation stocks rose on Friday as analysts expect crude palm oil (CPO) prices to rise on rising demand for palm oil for energy use amid a decline in inventory.
At 10.56am, the FBM KLCI rose 4.78 points to 1,725.75. Turnover was 403.61 million shares valued at RM324.58mil. There were 235 gainers, 190 losers and 248 counters unchanged.
United Plantations rose the most, up 56 sen to RM26.86 with just 100 shares done.
IOI Corp rose seven sen to RM5.37, Kuala Lumpur Kepong four sen to RM21.48 while Sime Darby added one sen to RM9.42.
UOB Kay Hian Malaysia Research maintained its Overweight on the plantations sector as it expected CPO prices to gain upside momentum on easing concerns over high inventories.
"CPO prices in the past month have been well supported by the easing of high inventory risk as plantation companies have lowered their fresh fruit bunches production guidance and exports are better than expected.
"Also, the wide gap between crude oil and CPO price has led to increased palm oil demand for energy use. Producing countries are taking steps to increase biodiesel consumption to reduce the high inventory level. Maintain Overweight," it said.
UOB Kay Hian Research pointed out that more positive newsflow supported CPO prices in August with CPO trading above RM2,400 a tonne.
"Over the last one week, we saw less bearish market sentiment for palm oil, and the fear of rising production and inventory has been gradually subsiding," it said.
The research house said the key factors leading to the change in expectations were lower FFB production growth guidance by Malaysia- and Indonesia listed companies.
It added that palm biodiesel has been gaining market share as the feedstock for biodiesel. Oil World estimates market share for 2013 at 26%, up from 17% in 2008, thanks to cheaper pricing and rising domestic usage.
"Slower increase in inventory levels in both producing and consuming countries, especially with China's palm oil inventory being 30% off from its peak in May 2013," it said.
At 10.56am, the FBM KLCI rose 4.78 points to 1,725.75. Turnover was 403.61 million shares valued at RM324.58mil. There were 235 gainers, 190 losers and 248 counters unchanged.
United Plantations rose the most, up 56 sen to RM26.86 with just 100 shares done.
IOI Corp rose seven sen to RM5.37, Kuala Lumpur Kepong four sen to RM21.48 while Sime Darby added one sen to RM9.42.
UOB Kay Hian Malaysia Research maintained its Overweight on the plantations sector as it expected CPO prices to gain upside momentum on easing concerns over high inventories.
"CPO prices in the past month have been well supported by the easing of high inventory risk as plantation companies have lowered their fresh fruit bunches production guidance and exports are better than expected.
"Also, the wide gap between crude oil and CPO price has led to increased palm oil demand for energy use. Producing countries are taking steps to increase biodiesel consumption to reduce the high inventory level. Maintain Overweight," it said.
UOB Kay Hian Research pointed out that more positive newsflow supported CPO prices in August with CPO trading above RM2,400 a tonne.
"Over the last one week, we saw less bearish market sentiment for palm oil, and the fear of rising production and inventory has been gradually subsiding," it said.
The research house said the key factors leading to the change in expectations were lower FFB production growth guidance by Malaysia- and Indonesia listed companies.
It added that palm biodiesel has been gaining market share as the feedstock for biodiesel. Oil World estimates market share for 2013 at 26%, up from 17% in 2008, thanks to cheaper pricing and rising domestic usage.
"Slower increase in inventory levels in both producing and consuming countries, especially with China's palm oil inventory being 30% off from its peak in May 2013," it said.