Sime, GenP rise briefly on Malaysia CPO export tax exemption

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KUALA LUMPUR (Sep 5): Plantation shares like Sime Darby Bhd and Genting Plantations Bhd (GenP) rose in early trade on news Malaysia will exempt crude palm oil (CPO) from export taxes this month and October.

Sime Darby rose as much one sen or 0.1% to RM9.50 while GenP climbed as much 12 sen or 1.2% to RM10.12.

Both stocks, subsquently, erased gains as investors' locked in profit from the share prices rise.

At 10.58am, Sime Darby Bhd fell to RM9.48 while GenP was flat at RM10.

Yesterday, Plantation Industries and Commodities Minister Datuk Seri Douglas Uggah Embas said Malaysia, the world’s second-largest palm oil producer, decided to exempt crude palm oil (CPO) from export taxes for September and October to help cope with rising inventory and falling prices.

The withdrawal of the export tax will help give some breathing space to local upstream producers which produce and market CPO. The tax rate has been lowered to 4.5% since June this year in tandem with the decline in CPO prices. The rates are reviewed every month.

Today, investors have also note analyst downgerades on the plantation sector.

In a note, Affin Investment Bank Bhd announced a downgrade for the sector to “neutral” from “overweight”, citing the recent three months crude palm oil futures dipping below RM2,000 a tonne.

Plantation analyst Ong Keng Wee attributed the fall in CPO prices to a series of bad news such as projected record-high US soybean production, weak palm oil export growth and slow progress in biodiesel implementation .

Nonetheless, Ong is projecting a CPO price recovery in 2015 and 2016.

“We expect a price recovery, as prices below RM2,000/MT are likely to lead to cutbacks in plantation upkeep as well as an increase in replanting activities and a slowdown in new plantings.

“Based on the still-tight global supply of major vegetable oils in 2014/15 and further progress in biodiesel adoption in Malaysia and Indonesia, we expect firmer CPO prices in 2015/16,” said Ong.