PPB, Sime decline on valuations, crude oil slump

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KUALA LUMPUR (Sept 18): Plantation stocks Sime Darby Bhd fell 4% and PPB Group Bhd lost 1% among Bursa Malaysia top decliners at noon break today. The share prices decline came on expensive valuations and lower crude oil prices, analysts and dealers say.

At 12.30pm, PPB fell 16 sen to RM14.06 with 85,400 shares done, while Sime declined 11 sen to RM9.11. PPB and Sime were the fifth and ninth largest decliners on the exchange.

For comparison, the FBM KLCI fell 5.04 points or 0.3% to 1,838.74 points.

Public Investment Bank Research analyst Chong Hoe Leong attributed the fall in plantation shares to high valuations.

“In terms of valuation, I think some counters are not cheap,” Chong told theedgemalaysia.com today.

He said there was a slight downside risk to some plantation shares, as the forecast on crude palm oil (CPO) prices remained cautious.

Meanwhile, dealers see the dip in crude oil prices as contributing to the decline in plantation shares.

This is because lower crude oil prices may lead to less CPO demand as feedstock for biofuel production.

Reuters reported that Brent crude dropped towards $98 per barrel on Thursday, pressured by a stronger dollar on fears of a looming U.S. interest rate increase and a steep spike in U.S. crude stocks.

Poor demand and abundant supplies have pushed down the oil benchmark to a 26-month low earlier this week, and have kept it below $100 for more than a week.

Ahmad Shehran, a dealer told theedgemalaysia.com: “For (the production of) biodiesel, crude oil price needs to be high."