Plantation stocks good value amid crude palm oil rally, says RHB Research

Following months of weak oil prices, crude palm oil prices have rallied to present levels of MYR 2379/tonne ($772.11), with RHB Research recommending plantation stocks as value buys for the coming year. “With the markets in a liquidity-driven rally, we believe cyclical sectors like plantations could be the next play, providing investors with a relatively safe haven, in terms of earnings,” says the research house in a pair of broker’s reports issued yesterday. 

So far, RHB has not noticed any significant catalyst that could have caused this re-rating aside from a surprisingly positive showing in Malaysian plantation statistics released recently. They suspect that the rally could have been largely caused by the increased liquidity in the market following the introduction of unprecedented liquidity into global markets across all asset classes. 

RHB sees CPO prices holding steady in 3Q2020 given that CPO production only started to increase in June. Pent-up demand is likely to continue until at least August or September in light of Deepavali celebrations in November when demand for oil increases.