Thursday December 30, 2010
Plantation related stocks up
By CECILIA KOK
PETALING JAYA: Plantation-related counters advanced yesterday, with palm oil plantation index surging 148.67 points to 15,490.52, and helped lift the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) 6.90 points higher to close at 1,524.34.
Gains registered by both big-cap and lower-liner plantation stocks were driven largely by a buoyant outlook on crude palm oil (CPO), as tight supply of the commodity amid an expected pick-up in demand as well as the prevailing poor weather conditions were expected to sustain CPO prices on the high side over the medium term.
Benchmark CPO for March 2011 delivery on the Bursa Malaysia Derivatives Exchange hit a new 33-month high at RM3,778 per tonne on Tuesday before losing some ground to settle at RM3,733 per tonne yesterday.
Most analysts believed CPO prices would likely remain firm over the next few months, with a strong possibility of reaching RM4,000 per tonne before the market could see some softening of the prices set in from the middle of next year onwards.
Plantation-related counters dominated Bursa Malaysia's gainers list throughout the day, with Hap Seng Consolidated Bhd, Tradewinds Plantations Bhd, CB Industrial Product Holdings Bhd (CBIP) and PPB Group Bhd listed among the 10 top-gaining counters at the close of trade.
Hap Seng rose 37 sen to RM6.96, while Tradewinds added 34 sen to RM3.41 and CBIP, 26 sen to RM3.95. PPB, meanwhile, was up by 22 sen to RM17.32.
Weather forecasters predicted that the La Nina effect, which could cause heavy rainfall and flooding in South-East Asia, would last through the first quarter of 2011. Such poor weather condition was expected to dampen the output of top palm oil-producing countries like Malaysia and Indonesia.
Similarly, the La Nina effect would also be upon South America, and weather forecasters were predicting a prolonged drought in the region, hence hurting their output of soybeans.
The expected cutback in the harvest of these commodities due to the prolonged rainy and dry season in different parts of the world has raised concern of tight supply. At the same time, an expected strong growth in the demand for these commodities by emerging economies, specifically big users like China and India, would likely add further pressure on the supply of commodities during the first half of next year.
Based on these factors, analysts believed commodity prices, including that of CPO, would remain firm until a potential bumper harvest could set in by the middle of 2011 and soften their prices.
On local plantation plays, most analysts suggest that small and medium-cap counters would likely provide more excitement compared with big-cap stocks that many believed were already fairly valued.
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