CPO futures cross RM2,600 level

This was unusual for the sector as November and October were peak production months and traditionally a period when the price of the commodity was low, a senior analyst with a local brokerage told StarBiz.

CPO futures for November delivery rose for the fourth consecutive day, gaining RM43 in morning trading to RM2,635 per tonne. It hit an intra-day high of RM2,644 and closed at RM2,604.

The two-month futures for October delivery hit an intra-day high of RM2,635 but ended at RM2,595. For the day, the average trading price was RM2,608.56.

The senior analyst said, however, that the strong price of the commodity, while out of the ordinary, was ''not unexpected” given that global crude oil price reached a record high of US$80.36 a barrel on Sept 14, and the growing fears that the record price of wheat of above US$9 a bushel on Sept 12 might reduce the acreage for soybean planting.

Extreme weather conditions over the past few months were also expected to bring down the soybean yield, he added.

Meanwhile Bloomberg reported that soybean oil traded in Chicago gained for a third day, rising as much as 1.1% to 40.46 US cents a pound yesterday. That has widened the premium it trades above palm oil to 6.5 US cents a pound, the news agency said.

However, the performance of Bursa Malaysia's plantation stocks was mixed yesterday.

IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) fell five sen to RM5.75 and 50 sen to RM11.40 respectively, while Kulim (M) Bhd put on 10 sen to RM6.05.

Shares in Sime Darby Bhd and merger partner Kumpulan Guthrie Bhd rose 10 sen each to RM9.60 and RM6.15 respectively.

Kenanga Investment Bank plantation sector analyst Yin Shao Yang said investors were probably sitting on the sidelines ahead of the US Federal Open Market Committee (FOMC) meeting today.

“There is still a lot of value in these counters, which are fundamentally still very strong,” he said.

A dealer contacted by StarBiz concurred that market players were holding off investments until after the FOMC decision on US interest rates.

“Volume was very thin, but the plantation sector had been one of the day's better performers, given the market circumstances,” he added.

The senior analyst said the firmer CPO prices had led to some investors taking profit on plantation counters.

He said while the current CPO price could be cyclical, the commodity still looked bullish for the long term. “Investors interested in the sector could take a long-term bet,” he said.

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Source: biz.thestar.com.my