KUALA LUMPUR (Sept 8): The exemption on export taxes for crude palm oil (CPO) is positive for pure upstream palm oil players in Malaysia, but negative for players with significant downstream operations, according to CIMB Investment Bank Research.

However, the research house said this would not impact significantly its earnings projections.

Last week, Plantation Industries and Commodities Minister Datuk Seri Douglas Uggah Embas announced that export taxes for CPO will be exempted for September and October to help cope with rising inventory and falling prices.

“While this is a slight surprise to us, it will be positive for Malaysian planters but negative for refiners in Malaysia in the near term,” CIMB IB’s research analyst Ivy Ng Lee Fang wrote in a note today.

She said the move to cut export tax in September to zero would allow CPO exporters in Malaysia to save RM106 per tonne in export tax value. This is based on a 4.5% export tax multiplied RM2,348.80 per tonne.

“However, this will be negative for Malaysian refiners as they will become less competitive against the Indonesian refiners for the rest of September,” she said.

Ng maintained her “neutral” rating for the sector with preference for planters with high output growth prospects.

“Overall, we view this measure as positive in the short term as it will encourage CPO exports from Malaysia,” she said, noting the weak exports over the past few months.

"But this may not be able to significantly lift CPO prices," Ng added.

Furthermore, she highlighted that Indonesia may cut its CPO tax rate to zero in October if CPO prices stay below US$750 per tonne.

This may dampen the CPO tax advantage against Indonesia, she said.