Plantation stocks head south on weaker CPO price outlook

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KUALA LUMPUR (June 18): Plantation stocks headed south this morning, after an analyst forecast crude palm oil (CPO) prices to continuously come under pressure in the second half this year, due mainly to the strengthening of the US dollar and stronger production outlook.

As at 11am, Kuala Lumpur Kepong Bhd fell 3.77% to RM24, while IOI Corp Bhd was down as much as 2.98% to RM4.56.

Meanwhile, Sime Darby Plantation Bhd, which was recently included in the Dow Jones Islamic Market Malaysia Titans 25 Index, too declined 3.63% to RM5.31 so far.

Felda Global Ventures Holdings Bhd, meanwhile, saw a slight drop of 1.28% to RM1.54. Boustead Plantations Bhd dipped 0.78% to RM1.27.

In a note released this morning, PublicInvest Research analyst Chong Hoe Leong revised the CPO price outlook downwards to RM2,350, from RM2,500 per metric ton (mt) previously.

"After hitting 22-month low, CPO prices rebounded to RM2,336 per mt and we think it could head toward RM2,350 per mt with the recent strength in US dollar, attributed to the interest rate hike outlook.

"Also, given the stronger CPO production outlook in the second half, boosted by the seasonal trend and favourable rainfall, CPO price is unlikely to strengthen in the near term," Chong observed.

The research firm maintained its "neutral" outlook on the sector.

At the time of writing, the benchmark three-month CPO futures were traded RM19 lower at RM2,317 per mt on the Malaysian Derivatives Exchange. Bursa Malaysia's Plantation Index fell 1.18% to 7,691.16 points, compared with a 0.92% decline in the benchmark FBM KLCI Index.