PETALING JAYA: Plantation stocks took a beating in early trade on Bursa Malaysia yesterday as the lower crude oil price continued to curb demand for crude palm oil (CPO) as an alternative fuel. Late buying interest, however, helped prop up heavyweights IOI Corp Bhd and Kuala Lumpur Kepong Bhd, which recently came under heavy foreign selling, to close unchanged at RM6.65 and RM15.40 respectively.
Those topping the losers’ list included Kulim (M) Bhd and United Plantations Bhd, which lost 20 sen each to RM8.05 and RM12 respectively, Glenealy Plantations (Malaya) Bhd down 12 sen to RM4.98 and Sarawak Oil Palms Bhd eased five sen to RM5.90.
Plantation giant Sime Darby Bhd, however, firmed 10 sen to RM8.45.
OSK Research said in its report that in the immediate term, falling crude oil prices could further drag down the CPO price and plantation stocks.
The brokerage, which has an “overweight” on the sector, said the lower crude oil price could also lead to lower input cost, particularly on fertilisers, for plantation companies.
Market players are also concerned with Malaysia’s palm oil stocks for June, which are expected to hit two million tonnes – the highest in 25 years. The Malaysian Palm Oil Board is expected to release the figure today.
A trader said: “Higher inventory coupled with peak production season from August to September does not look good for CPO (prices).”
The current CPO price had eroded by about 27% from its all-time high of about RM4,486 per tonne in March. Yesterday, the benchmark CPO October futures contract closed RM59 higher at RM3,530 per tonne.
On the international front, the European Union (EU) could back down from its earlier target to have 10% total energy consumption from renewable sources by 2020. The EU has come under heavy criticism as biofuel has been blamed for the higher food prices.
The Environment Committee of the European Parliament recently voted to lower the target to 4% by 2015.
However, the European Commission (EC) immediately responded that the Environment Committee was not the official opinion of the European Parliament.
The EC had defended its biofuel policy, stating that only 2% of the EU’s arable land was devoted to biofuel.
OSK Research said its bullishness on the plantation sector hinged on food consumption and did not rely on biodiesel demand.
It said even if the EU lowered its biofuel target, there should not be any adverse impact on edible oil prices now as biodiesel had stopped being viable since last year.
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