KUALA LUMPUR, Dec 4 (Reuters) - Malaysian plantation stocks such as SimeDarby rose on Tuesday as investors bet a surge in palm oil prices willmake the sector one of the fastest growing in 2002. The Kuala LumpurPlantations Index rose as much as 1.24 percent to 1.586.57, its highestsince mid-September, taking its gain since early October to more than 12percent as palm oil prices have surged.For 2001, the index of 40 stocks boasts a 15.8 percent gain comparedwith the benchmark Composite Index's 5.5 percent decline.Malaysian crude palm oil (CPO) futures have soared by over a third inthe past two months, boosted by stronger-than-expected demand from keybuyers India, China and Pakistan as worries about high stockpiles haveeased.Participants in the country's commodity and stock markets are upbeatabout prospects for palm oil prices for the coming year."We continue to be positive that the CPO prices will not fall to itsprevious low and thus we are maintaining our average price forecast forfiscal year 2002 at 1,150 ringgit per tonne, a 32 percent increaseyear-on-year," CIMB Research said in a report.The benchmark third-month February futures contract was up 14 ringgitat 1,176 ringgit ($306.84) per tonne at 0357 GMT, extending a 55 ringgitgain on Monday.Palm oil traders are even more bullish.Dorab Mistry, a leading Indian trader, told Reuters on Monday that CPOfutures will "definitely" soar to a four-month high of 1,300 ringgit bythe first quarter of 2002.And if China raises its import quota of palm oil as expected to 2.4million tonnes in 2002, from 1.4 million this year, prices could hit 1,600ringgit, Mistry said.

HIGHER PROFITS

A rebound in palm oil would mean sharply higher profits for plantationcompanies in Malaysia, the world's largest palm oil producer with anoutput of over 10 million tonnes a year."If you look at the expected year-on-year growth in palm oil prices in2002, it will be more than 20 percent," said Noor Azwa Mohd Noor,plantations analyst at KAF Seagroatt & Campbell."That should translate to the bottom line of plantation companies."The improved outlook comes as a relief for Malaysian plantationcompanies, which have found it hard to make money in the past year.Previously they have had to rely on other ventures like real estatedevelopment to boost earnings.Conglomerate Sime Darby, for example, reported a 44 percent drop inoperating profits from its plantations division in the year to end-June2001.The division, which contributed about 50 percent of group profits in1999, accounted for a mere seven percent in 2001.But with palm oil prices rising, plantation companies could be high oninvestors' shopping list next year."Plantation stocks are expected to outperform the KL Composite Index in2002," said Noor Azwa.Besides Sime, Malaysia's other top listed plantation companies includeGolden Hope , IOI Corp and Kumpulan Guthrie .At 0434 GMT, Sime shares were up two cents at 4.56 ringgit whileKumpulan Guthrie added one cent to 2.06 ringgit. IOI and Golden Hope wereunchanged at 3.56 ringgit and 3.54 respectively.The Plantation Index had trimmed its gain to 0.44 percent.