Kenanga maintains 'overweight' on plantation

KUALA LUMPUR: Kenanga Research is maintaining 'overweight' call on the plantation sector as it expects crude palm oil (CPO) prices to increase around 17 per cent this year to RM2,800 per metric tonne from last year's average of RM2,400 per metric tonne.

The research house said the target was based on the current demand from the Indonesian biodiesel industry and the decline of stocks level in Malaysia in the

near-term.

"We also expect the quantitative easing tappering to give a positive impact to CPO prices.

"In addition, we also expect a good set of first quarter 2014 results are due in May as average CPO price has gained 15 per cent year-on-year in the first quarter 2014," said Kenanga Research in a research note.

Although current CPO prices at around RM2,650 per metric tonne is close to the consensus target of RM2,675 per metric tonne, Kenanga Research was

maintaining its bullish view on the price.

"Demand for palm oil should increase in the second quarter of this year due to restocking ahead of the Hari Raya Aidilfitri festival in July," it added.