Foreign investors buy RM324.7mil equities on Bursa

By GANESHWARAN KANA ganeshwaran@thestar.com.my PETALING JAYA: Malaysian oil palm planters’ earnings in the first quarter of this year will likely be weighed down by lower crude palm oil (CPO) and palm kernel (PK) prices.

Maybank IB Research, which has maintained its “neutral” outlook on the sector, said output recovery in the domestic oil palm sector has failed to compensate for the sharply lower average selling prices of CPO and PK.

Sarawak-based planters’ earnings are anticipated to be affected the most on a yearon-year (y-o-y) basis, given the significant decline in CPO output in the first quarter.

Despite the weak earnings expectations for the overall industry, Maybank IB Research indicated that IOI Corp Bhd would likely be an outperformer in the first quarter.

The earnings of the listed plantation firms will tentatively be released next month.

“Our preliminary estimates, based on first-quarter CPO output release by the Malaysia Palm Oil Board, suggest first-quarter earnings are likely to come in mostly weaker compared to a year ago.” The brokerage said

Malaysia enjoyed a 13% y-o-y growth in CPO output to 4.5 million tonnes but this is not sufficient to offset the 21% decline in CPO average selling price to RM2,466 per tonne.

“This is exacerbated by even sharper fall in PK price by 33% y-o-y to RM2,166 per tonne. The only exception is IOI Corp, as its first-quarter output growth was high at 32% y-o-y,” said the research house in a note.

The CPO output growth in the first quarter has been uneven across the country. While Sabah planters witnessed the highest CPO output growth at 21% y-o-y, followed by Peninsular Malaysia’s 16% y-o-y expansion, the oil palm plantations in Sarawak saw a 5% y-o-y decline.

This was in part due to the high-base effect a year ago whereby growth in the first quarter of 2017 for Sarawak was a strong 29% compared with the first quarter of 2016.

On the prospects of the downstream players in the plantation sector, Maybank IB Research expects poor margins in the first quarter of this year for the refiners.

On the other hand, the oleo-chemical players are likely to sustain their good margins.

“Refiners will likely suffer from low-to-negative margins due to Malaysia’s imposition of CPO duty-free exemption since Jan 8, 2018 till end-April, which makes Malaysian refiners less competitive vis-a-vis Indonesian refiners in the export market.

“The refiners’ low utilisation rate in the first quarter of this year of 59% is also an indication of a tough business environment.”

Meanwhile, integrated players with oleo-chemical divisions such as IOI Corp and Kuala Lumpur Kepong Bhd are likely to sustain their good margins enjoyed since the third quarter of 2017, given the stable raw materials cost.

The still-high utilisation rate of the oleo industry is a sign of promising prospects, said the research house. KUALA LUMPUR: International investors continued to accumulate stocks listed on Bursa Malaysia last week albeit at a rather similar pace compared to the week before, according to MIDF Research.

In its weekly fund flow report, MIDF said based on preliminary data, foreign investors acquired RM324.7mil equities last week, the 8th time in 2018 that weekly foreign buying levels exceeded RM300mil.

The research house noted that foreign buying activity occurred on four out of five trading days last week.

“Global investors made a strong start to the week as they mopped up RM188.3mil net of local equities on Monday.

“This was also the largest daily amount acquired during the week, coinciding with the KLCI adding 12.7 points as President Trump’s tweet expressed optimism on US-China relations, which softened fears of a trade war,” MIDF said.

Foreign inflows slightly slowed down the next day to a tune of RM131mil net, the research house said.

Wednesday saw a decent net outflow of RM27.4mil amid escalated tensions over Syria, which overshadowed the news of volume across Bursa exceeding four billion shares amid the timing of the 14th General Election, which was made public on the day before.

Nonetheless, MIDF said foreign investors returned to Bursa on Thursday and Friday but at a marginal level of RM17.5mil and RM15.3mil net, respectively.

“It was noteworthy that Malaysia and South Korea were the only markets among the seven Asian exchanges that we track to experience foreign inflows on Thursday and Friday,” MIDF said.

On a year-to-date basis, foreigners have so far accumulated RM2.85bil net of local equities.