PETALNG JAYA: Affin Hwang Investment Bank remains positive on the plantation sector, maintaining its “overweight” call amid expectations that crude palm oil (CPO) production will continue to recover gradually in the coming months, while supportive biodiesel policies and geopolitical tensions could keep prices firm.
The research house said Malaysia’s CPO production rebounded strongly in April 2026, rising 18.4% month-on-month (m-o-m) to 1.63 million tonnes, driven by improved weather conditions and the return of workers after the Hari Raya Aidilfitri holidays.
It noted that production growth was seen across Peninsular Malaysia, Sabah and Sarawak.
“We expect the production trend to gradually rise going into third quarter of financial year 2026 (3Q26),” the report said.
Despite stronger output, Affin Hwang Research expects Malaysia’s overall 2026 CPO production to remain largely flat or see a slight year-on-year decline after a robust 2025.
At the same time, the bank expects CPO prices to stay supported amid tightening vegetable oil supply and rising biodiesel demand globally.
“The ongoing US-Israeli war with Iran has created uncertainty globally, causing volatility in energy and agricultural commodity prices,” it said, adding that tighter supply due to shifts in biodiesel mandates could provide a “supportive floor” for palm oil prices.
Affin Hwang Research noted that the average Malaysian Palm Oil Board locally delivered CPO price rose 5.7% m-o-m in April to RM4,567.50 per tonne.
It said Indonesia’s planned rollout of its B50 biodiesel programme from July 2026, alongside Malaysia’s B15 biodiesel implementation from June, is expected to underpin demand for palm oil.
“Currently, the CPO price hovers above the RM4,500/tonne level.
“We believe vegetable oil prices, including CPO, will be supported by expectations that demand for vegetable oils will tighten,” the research house said.
It is forecasting CPO average selling prices of RM4,450 to RM4,550 per tonne for 2026 and RM4,550 to RM4,650 per tonne for 2027.
However, it cautioned that export demand remains uneven as palm oil competes with other edible oils such as soybean, rapeseed and sunflower oil.
Malaysia’s palm oil exports fell 14.3% m-o-m in April to 1.3 million tonne after strong buying activity in March.
Malaysia’s palm oil inventory level also edged up 1.7% m-o-m to 2.31 million tonne in April, snapping three consecutive months of decline as production outpaced exports.
On weather conditions, Affin Hwang Research said El Nino–Southern Oscillation-neutral conditions are expected to persist through the 2Q26, although there is a growing probability of El Nino emerging in the third quarter.
“Any deterioration in crop conditions due to extreme wet or dry weather would have an impact on edible oil production in 2026,” it said.A
mong its preferred stocks, the research house continues to favour Ta Ann Holdings Bhd
and Johor Plantations Group Bhd, citing more attractive valuations and preference for Malaysian upstream plantation companies amid uncertainties over land security in Indonesia.
Affin Hwang also maintained “buy” calls on Hap Seng Plantations Holdings Bhd, IOI Corp Bhd, Genting Plantations Bhd and Jaya Tiasa Holdings Bhd, while retaining “hold” recommendations on Kuala Lumpur Kepong Bhd and SD Guthrie Bhd.
