CPO to sustain bullish run on pent-up demand

By SHAHEERA AZNAM SHAH / Pic TMR

THE price of crude palm oil (CPO) will continue to be on a bullish stance driven by pent-up demand post the Covid-19 pandemic, which will help keep the price above the RM3,000 per tonne mark.

Rakuten Trade Sdn Bhd head of research Kenny Yee said pent-up demand for edible oils like CPO remains sanguine on the plantation stocks despite the return of the palm oil export duty effective January 2021.

“Like other sectors, the global recovery post-Covid-19 is creating pent-up demand for most commodities.

“For CPO prices, we reckon it may stay above the RM3,000 per tonne level with RM4,000 being a main hurdle in the coming months,” he said in a report.

The benchmark palm oil futures contract on the Bursa Malaysia Derivatives Exchange for March delivery closed RM125 higher at RM3,725 yesterday.

The Plantation Index was also among the anchors for the FTSE Bursa Malaysia KLCI yesterday, rising 0.37% or 26.66 points to 7,329.50 points.

Industry analysts believe the strong momentum of the crude oil is expected to sustain in the first quarter of 2021 before it softens beyond the quarter.

The momentum will likely be driven by increased demand, particularly from the hotel, restaurant and conference sector and will be balanced by the anticipated higher production by Malaysia and Indonesia.

Yee said the government will see a challenge in the implementation of the national biodiesel programme due to slow demand and the CPO price factor.

“With crude prices at current levels, biodiesel remains a not- too-attractive proposition given the current price point and the expected export levies being a source of revenue for the industry.

“Implementing the biodiesel mandate will remain a challenge in 2021 despite its advantages as a more sustainable fuel for the future,” he said.

Yee continues to favour technol- ogy stocks like VIS-Dynamics Holdings Bhd, JCY International Bhd, Elsoft Research Bhd, Inari Amerton Bhd and MI Technovation Bhd and small-cap stocks rather than the big blue chips.

“Despite the challenges of 2020, we believe smaller caps will take the lead in 2021 following the completion of re-jigging of portfolios and supported by the persistent inflow of funds from retail investors who will continue to be key market participants,” Yee noted in a release yesterday.

On small-cap stocks, the online broker recommends are Supercomnet Technologies Bhd, App- Asia Bhd, RCE Cap Bhd, TCS Group Holdings Bhd and Dnonce Technology Bhd.

Yee added that blue chips and big-cap stocks will still play a dominant role but he expects to see heightened and sustained participation in small caps after a point given their value and growth potential.

He noted that the Securities Commission Malaysia plan to lift the ban on regulated short-selling this year will enhance the vibrancy of the equities market, but the immediate impact will cap gains for blue chips.