WHILE the broad market succumbed to heavy profit-taking yesterday, plantation stocks continued to rally, fuelled by the optimistic outlook in crude palm oil (CPO) prices.
The bullish sentiment on CPO futures, which had hit limit up on Monday and on the spot market, had spilled over to plantation counters on the KLSE because strong commodity prices would boost the bottom lines of the related companies, dealers said.
The outlook for CPO prices in the next six months is rosy given that recent data on CPO as well as soya oil point to tight supply in a reasonably firm edible oils market. Some analysts see the CPO price peaking in the first quarter next year.
The share prices of 11 plantation counters touched new highs for the year, which helped lift the KLSE Plantation Index 17.3 points or 0.8% to 2,123 yesterday, the highest since April 1998.
Diversified plantation group IOI Corp Bhd leaped to a record high of RM7.30, before closing at RM7.10, while its subsidiary, Palmco Holdings, closed at a new high of RM7.60.
Among other counters rising to fresh highs this year were Asiatic Developments Bhd, Kumpulan Guthrie Bhd, Kulim Bhd, PPB Oil Palms Bhd and United Plantations Bhd.
Kulim Bhd was one of the top gainers in the sector. It soared to RM3.14 – the highest level since May 2000 – before closing at an 18-month high of RM2.98, up 13 sen.
Kumpulan Guthrie climbed 10 sen to a 22-month high of RM2.48, while PPB Oil Palms finished at a 13-month high of RM3.20, up 8 sen, after touching RM3.32 in intra-day trade.
Dealers said late profit-taking trimmed gains of some plantation stocks.
Plantation counters had been largely neglected in the last few months after many analysts downgraded the sector as they expected the two-year up-cycle of the CPO price to end soon, which would see commodity prices softening gradually next year.
The change in market conditions in the edible oils sector and the strengthening of commodity prices have prompted some analysts to consider revising their earnings forecast upward.
Nonetheless, others see this rally as an opportunity for investors to sell on strength, given that the CPO prices would peak sooner or later.
The average CPO price was likely to rise above RM1,500 this year with the present run-up on CPO prices, said analysts.
Market consensus now have average CPO prices at RM1,400 to RM1,500 next year.
The US Department of Agriculture has lowered its estimate for this year's soy crop to 2.47 billion bushels, from 2.64 billion earlier. Production last year totalled 2.75 billion bushels. The soy bean harvest in the US had been affected by drought.
As for CPO, the Malaysian Palm Oil Board reported that palm oil stocks had dipped below one million tonnes last month, a level that was lower than expected.
Analysts said the stock level would continue to drop with the traditional low production season from November to March.
And this, against a scenario of rising demand for edible oils in the coming Deepavali and Ramadan festive seasons.
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