RESEARCH HOUSES MAINTAIN 'NEUTRAL' STANCE ON PLANTATION SECTOR

KUALA LUMPUR, March 13 (Bernama) -- Research houses have maintained a “neutral” rating on the plantation sector saying crude palm oil (CPO) price would likely be supported due to concerns over lower palm oil exports from Indonesia and weaker supply growth from Malaysia.

In a note today, CGS-CIMB Securities Sdn Bhd said Malaysian palm oil stocks fell seven per cent month-on-month (m-o-m) to a six-month low of 2.12 million tonnes as of end-February 2023, due mainly to lower production and imports.

“We project palm oil stocks to fall by 13 per cent m-o-m to 1.84 million tonnes by end-March 2023 due to higher export demand ahead of the Lebaran festival and slower m-o-m growth in supply due to flooding in Johor since March 1,” it said.

However, it said the current high palm oil stocks in India of 3.2 million tonnes and China of 918,000 tonnes in January 2023 may cap the upside to CPO price.

Hence, CGS-CIMB Securities expects the CPO price to trade in the RM3,800-RM4,300 per tonne range in March 2023.

Meanwhile, Hong Leong Investment Bank (HLIB) said CPO price will likely remain well supported at above RM4,000 per tonne in the near term, supported by a weak near-term production outlook arising from recent heavy rainfall, and Indonesia’s biodiesel mandate and near-term restrictive export policies.

“For now, we hold the view that CPO price will weaken once Indonesia relaxes on its Domestic Market Obligation policy,” it said

In HLIB's view, it said stockpile will likely remain on a downtrend in the near term given recent excess rainfall which will likely impact near-term output, and Indonesia’s restrictive policy which will likely boost Malaysia’s palm oil exports.

On another note, MIDF Research expects that average local CPO delivery prices would climb by 13 per cent to RM4,400 per tonne (following distortion on Indonesia’s palm oil) level from March to April.

It would then decline by 11 per cent to RM3,837 per tonne in May after the Eid Al-Fitr Festival as a result of the Indonesian government's decision to lift its export restriction in order to reduce glutting stockpiles.

Hence, MIDF Research expects the CPO target price of RM3,500 per tonne for 2023. 

-- BERNAMA