KUALA LUMPUR (April 21): Shares of plantation companies fell today despite the price of crude palm oil (CPO) hitting a record high of RM4,399 per tonne.

At market close, the Bursa Malaysia Plantation index was down 0.9% to 6,818.03 points.

Kuala Lumpur Kepong Bhd fell 42 sen or 1.91% to close at RM21.52, IOI Corp Bhd dropped five sen or 1.23% to settle at RM4.01, while Sime Darby Plantation Bhd declined eight sen or 1.77% to RM4.43.

Crude palm oil futures, meanwhile, extended their gains. At the time of writing, the CPO futures contract for May settled RM114 higher at RM4,345 per tonne, after hitting a high of RM4,399 previously. CPO futures contract for June 2021 also ended RM114 higher at RM4,101, while July 2021’s closed RM87 higher at RM3,892.

Rakuten Trade head of research Kenny Yee said the fall in plantation stocks’ prices might be due to many analysts believing that the high CPO price is not sustainable.

“I am quite positive about the sector but consensus thinks that CPO price may soften, hence company earnings which are expected to be good this year are likely to be flat next year,” he told theedgemarkets.com.

Meanwhile, Fortress Capital Asset Management chief executive officer Thomas Yong said the high CPO price was a result of production supply disruptions due to the Covid-19 pandemic.

“Therefore, analysts do not expect the better pricing to translate into higher profits for CPO producers as output volumes are negatively impacted,” he told theedgemarkets.com.

CGS-CIMB’s Ivy Ng, who forecasts average CPO price to stay at RM2,900 per tonne this year, is of the opinion that government policies and weather will determine CPO prices moving forward.

“If the two factors are normalised, we think the supply should improve, prices are likely to correct,” she told theedgemarkets.com.

Source : The Edge Markets