The Edge Markets (08/01/2018) - KUALA LUMPUR (Jan 8): Malaysia's move to suspend crude palm oil (CPO) export tax for three months starting today (Jan 8, 2018) is positive for planters with significant upstream operations, as the move will boost CPO exports. 

CIMB Investment Bank Bhd analyst Ivy Ng Lee Fang wrote in a note today that the list includes Felda Global Ventures Holdings Bhd (FGV) and Genting Plantations Bhd.

“This measure will help encourage CPO exports from Malaysia, which have been weak following India’s move to raise import duties for palm oil in November. However, this move may not be able to significantly lift CPO prices due to the stronger ringgit and our projection that Malaysian palm oil stocks may have risen by 6% m-o-m to 2.7 million tonnes in Dec 2017.

"Negative for Malaysian refiners as they will be less competitive against peers," Ng said. She said planters with integrated oil palm operations in Malaysia like IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Wilmar International Ltd will see minimal earnings impact. Malaysia-listed PPB Group Bhd owns an 18.6% stake in Singapore-listed Wilmar, according to PPB's website.

MIDF Amanah Investment Bank Bhd analyst Alan Lim said news on Malaysia's CPO export tax suspension is positive to CPO prices, as lower inventory usually leads to higher prices of the commodity.

"We also believe that major consumers such as India and China will take this opportunity to buy more palm oil from Malaysia. We maintain our palm oil price forecast of RM2,900 per tonne for 2018," Lim said.

On Friday (Jan 5), Reuters, quoting Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong, reported Malaysia would suspend export taxes on CPO for a three-month period starting today (Jan 8, 2018) to boost prices.

The export tax suspension will be lifted before the three-month period if CPO stocks fall to 1.6 million tonnes, Mah said.