Kuala Lumpur, 7 January, 2002 (Business Times) - MALAYSIA’S palm oilsector is expected to perform favourably in the first quarter of the yearas crude palm oil (CPO) prices remain strong during the period due to gooddemand.Industry analysts said prices are expected to firm up towards the firstquarter of 2002 as the world’s 17 edible oils market can only opt foreither palm oil or soyabean oil at the moment.CPO prices breached the RM1,000 per tonne level on July 12 last year afterlanguishing at between RM600 and RM700 a tonne for 13 months.“Prices may firm up at least for the first six months of 2002 in view of asupply crunch of about 2.5 million tonnes of rapeseed oil and sunfloweroil,” a trader told Business Times in Kuala Lumpur last Friday.“There is a positive vibe in the air at the moment where a lot of playerscan sense that prices are more likely to move upwards than downwards,” hesaid.He said China’s formal entry as the World Trade Organisation’s 143rdmember is also set to increase its palm oil import quota to 2.4 milliontonnes this year from 1.4 million tonnes last year.Prices of CPO increased 59 per cent to hover between RM1,100 a tonne andRM1,200 a tonne compared with RM692 a tonne in February last year.Meanwhile, another trader said the next three months will see the shortageof sunflower and rapeseed oil which has been hit by poor harvest.“These two oils will not be easy to come by until the next round ofharvesting in March.”He said Malaysia’s palm oil also has the advantage over soyabean oil fromUS, Argentina and Brazil.“It is a Herculean task to export 80 million tonnes of soyabean from theAmerican continent to China... it takes 45 days compared with Malaysia’sdelivery of palm oil which only takes 30 days,” said the trader.PPB Oil Palms Bhd (PPB) executive director and chief operating officerKhoo Khee Ming agreed, saying all signs are pointing towards the companyperforming well this year and expects the streak to continue in thesubsequent quarters.“In my mind, it is clear that things are expected to pick up this year toacceptable levels after being bogged down long enough since 1999,” Khoosaid.“Exports are good at the moment and at this rate Malaysia will not have acarry-over stock of more than 1.5 million tonnes brought over from 1.2million in December last year,” said Khoo who oversees 103,000ha of oilpalm plantation land in Malaysia and Indonesia.Analysts, meanwhile, said local plantation companies are also expected torecord improved first quarter earnings due to the strengthening prices.“Companies such as Golden Hope Plantations Bhd, Kuala Lumpur Kepong Bhdand IOI Corp Bhd would have capitalised on the good prices by selling asfar forward as they can,” a plantation analyst pointed out.Khoo, meanwhile, said the strengthening of prices and strong fundamentalscoupled with lowering cost of production and higher yields will augur wellfor PPB.PPB Oil Palms registered a net profit of RM18.76 million, a 58.2 per centincrease for the nine-month period ending September 30 2001 compared withRM11.86 million in the same corresponding period in 1999.The company made a net profit of RM58.3 million in 2000, a 52 per centdrop from RM121.46 million in 1999.Multex Global Estimates’ compilation of five research houses forecast thegroup to register a net profit of RM31.45 million on the back of a RM209million revenue.Despite these cheerful prognostications, the Kuala Lumpur Stock Exchange(KLSE) Plantation Index showed a smaller improvement during the timecompared to the broader KLSE Composite Index (KLCI) and the KLSE EmasIndex.From October 31 to December 31 last year, the 39-member Plantation Indexappreciated 12.1 per cent compared to KLCI’s 16 per cent and the EmasIndex’s 14.29 per cent.The best performing counters of the 39-members listed on the PlantationIndex from the period between December 12 last year to January 4 this yearwas Kluang Rubber Co with a price increase 17.61 per cent followed by InchKenneth Rubber at 17.13 per cent and Riverview Rubber at 14.75 per cent.BBMB Securities, meanwhile, said in its report prices of CPO for this yearand 2003 is expected to hover around RM1,100 to RM1,200 tonnes.“The fundamentals of the plantation sector are still bullish and areexpected to remain intact... we maintain our overweight stance on theplantation sector,” it said.In its latest market outlook, the securities firm said exports of palm oilin December declined marginally by 0.6 per cent to 1.04 million tonnesfrom 1.05 million tonnes in November.While Pakistan and the European Union decreased their imports by 25.6 and5.2 per cent respectively, India raised its imports by 14.4 per cent andChina by 43.9 per cent.China is expected to increase its import quota to 2.4 million tonnes thisyear compared with 1.4 million tonnes last year with 70 per cent or 1.7million tonnes coming from Malaysia.The report also said that exports to India are expected to increase on theback of a drop in import duty on CPO from 75 per cent to 65 per cent.With the anticipated strong demand for palm oil, BBMB Securities said itexpects the national stock level to continue to deplete from the currentlevel of 1.29 million tonnes.Meanwhile, at the Malaysia Derivatives Exchange, CPO st futures pricesclosed higher last Friday as traders anticipate China to announce itsfirst import quota anytime this week.“China is expected to announce the 500,000 tonnes import quota anytimesoon due to the rise in demand as the Lunar Year nears and the goodproduction figures,” said the trader.The market also focused more on Malaysia’s palm oil compared to Indonesia,its nearest competitior, due to a disruption in shipments at Sumatra’sBelawan port as a result of a sinking dredger which is blocking the port.At the close, January delivery gained RM34 to finish at RM1,175 a tonnewith February, March and April deliveries each gaining RM35, RM36 and RM38to close at RM1,188 a tonne, RM1,196 a tonne and RM1,200 a tonnerespectively.Total turnover increased 993 lots to 2,398 lots from 1,405 lots while openpositions rose 3 contracts to close at 10,705 from 10,705.