In­dia’s crude palm oil im­port duty cut seen as pos­i­tive, timely

The Sun (Malaysia) - - SUNBIZ -

PE­TAL­ING JAYA: MIDF Re­search is pos­i­tive on the news that In­dia has re­duced the im­port duty on palm oil, as the move should make the com­mod­ity more com­pet­i­tive against other ed­i­ble oils in In­dia.

In­dia on Mon­day cut the im­port duty on crude palm oil to 7.5% from 12.5%. It also re­duced du­ties on im­ports of wheat and re­fined veg­etable oils. In­dia is the world’s largest im­poter of ed­i­ble oils.

“We also think that the move is timely as it should re­lieve con­sumer bur­den in In­dia ahead of the Deep­avali fes­ti­val which will fall on Oct 29 this year. All in, we ex­pect ex­ports of palm oil to In­dia to stay strong in Septem­ber af­ter a very strong pickup in Au­gust (+126% month-on-month to 428,652 tonnes) due to sus­tained pre-stock­ing ac­tiv­ity ahead of Deep­avali,” MIDF Re­search said in a re­port yes­ter­day.

The re­search house be­lieves that palm oil in­ven­to­ries in Malaysia should stay low at 1.55 mil­lion tonnes in Septem­ber (+6% month-on-month). Key as­sump­tions are an ex­port de­cline of 15%, and pro­duc­tion growth of 7%. Cargo sur­vey­ors’ data shows ex­ports de­clined by 16% month-on-month in the first 25 days of Septem­ber.

“We have in­creased our in­ven­tory es­ti­mate slightly (pre­vi­ously 1.46 mil­lion tonnes) as de­mand has weak­ened slightly as price ap­proached RM3,000 per tonne in the spot mar­ket.”

MIDF Re­search main­tained a pos­i­tive view on the sec­tor, adding that the crude palm oil price is ex­pected to stay strong at the range of RM2,500 to RM3,000 a tonne in the next three months.

Yes­ter­day, CPO fu­tures con­tracts on Bursa Malaysia De­riv­a­tives closed lower. Spot month Oc­to­ber 2016 shed RM51 to RM2,849 a tonne.

“Our top pick is KLK (Kuala Lumpur Ke­pong Bhd) due to its high ex­po­sure to the palm oil busi­ness and good earn­ings growth of 18% year-on-year to RM747 mil­lion in the nine months of FY16.

“We also like IOI Corp Bhd due to its pure ex­po­sure to palm oil busi­ness both in the up­stream and down­stream di­vi­sions. The com­pany’s earn­ings are ex­pected to re­cover in FY17 af­ter the up­lift of RSPO (Round­table on Sus­tain­able Palm Oil) sus­pen­sion,” said MIDF Re­search.

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