KUALA LUMPUR (Feb 3): Affin Hwang Capital Research has revised upward its average crude palm oil (CPO) price forecast to RM2,600 per metric tonne (MT) from RM2,400 per MT for 2017 and 2018, amid tight global supply and weakness in the ringgit.

In a note today, the research house said it sees the current uptrend in CPO prices as a positive for plantation players but pointed out that there are moderating factors to the commodity's price.

It said these factors include a recovery in CPO production, strengthening of the ringgit and narrower soybean premium.

"We think prices may stay high in 1Q17 as supply remains tight but believe CPO production could improve from 2Q17 onwards, putting pressure on prices," said Affin Hwang.

It said CPO production is expected to rebound by 5% to 10% in 2017 — lower than the research house's previous 10% to 15% forecast — due to the prolonged effect of El Nino, which will affect production for the first few months of the year.

It expects exports to increase in 2017 amid a better economic outlook and an increase per capita of oil and fat consumption, especially in emerging countries and restocking by major palm oil importers.

"Underpinned by tight global supply for palm oil especially in 1Q17 and weakness in ringgit against the US dollar, we now forecast 2017–2018 average CPO prices of RM2,600 per MT from RM2,400 per MT previously," the research house said.

In line with the higher forecast, Affin Hwang has raised its target prices on the plantation stocks under its coverage by 10% to 69%, but had maintained neutral on the overall sector.

The research house has upgraded Sime Darby Bhd, Felda Global Ventures Holdings Bhd and Genting Plantations Bhd to hold. IOI Corp Bhd, Kuala Lumpur Kepong Bhd and IJM Plantations Bhd were also upgraded to buy.

At 10.31am, plantation counters were mostly up, with Chin Teck Plantations Bhd rising 1.52% to RM8, PPB Group Bhd up 0.62% at RM16.20 and Genting Plantations climbing 0.55% to RM11.06.