At 11.22am, CPO was up RM24 to RM3,076 per tonne.
India's lowering of import duties on the commodity raises demand expectations, says Anilkumar Bagani, head of research at vegetable oil broker Sunvin Group, according to Dow Jones wire report.
PublicInvest Research said that as part of a bilateral agreement, India’s Ministry of Finance cut import duties on CPO and refined palm oil from Southeast Asian countries effective Wednesday.
The duty on CPO was lowered to 37.5% from 40% while a tax on the refined CPO was cut to 45% from 50%.
The research house believed this latest tax revision is set to boost Malaysia’s refined palm oil exports to India in the coming months as the duty gap between CPO and refined CPO has narrowed to 7.5% from 10% previously.
"The favourable move should help drive down Malaysian palm oil inventories and provide support to the current strong CPO prices. We maintain our bullish stance on the plantation outlook with a CPO price assumption of RM2,600/mt for this year. Our top three picks are Sarawak Plantation, Ta Ann Holdings and TSH Resources," it said.
Part of the bilateral agreement. India, the world’s largest palm oil buyer, has cut import duties on CPO from 40% to 37.5% and slashed duties on refined CPO from 50% to 45%. The lowering of import duties follows the trade agreement between India and Asean in 2009.
India has been cutting the import duty on CPO and refined CPO as well as a number of other key export commodities from Asean countries on an annual basis between 2010 and 2020.
"Malaysian refiners set to reap the gain. The latest Indian tax revision has made palm oil more competitive against the alternatives such as sunflower oil and soybean oil, which have the narrowest spread in 10 years. The narrower duty differential between CPO and refined CPO from 10% to 7.5% will likely see Indian buyers switching their demand from CPO to refined CPO, namely, palm olein.
"Currently, refined palm oil imports in India account for 18.5% of consumption, and are expected to see a boost in the coming months. Supported by the duty disparity between CPO and refined palm oil products following the resumption of export duties in Malaysia, coupled with the latest tax move from India, Malaysian palm oil refiners are set to enjoy better margins than its counterparts.
"Malaysian palm oil market share in India is expected to jump higher from the current level of 49.8% meanwhile," PublicInvest Research said.