KUALA LUMPUR (Feb 3): The new Indonesian regulation requiring local palm oil producers there to sell 20% of their production to domestic refiners at fixed prices starting from Thursday (Feb 3), coupled with various factors that would further widen average crude palm oil (CPO) prices between Malaysia and Indonesia, will negatively impact upstream palm oil producers TSH Resources Bhd, Kuala Lumpur Kepong Bhd (KLK), Sime Darby Plantation Bhd and Genting Plantations Bhd, said PublicInvest Research.

These four companies have a significant presence in Indonesia and they will not be able to take full advantage of current high CPO prices, it added.

“Coupled with the hefty CPO export tax and excise levy in Indonesia, the latest trade policy will likely further widen average CPO prices between Malaysia and Indonesia,” said the research firm in a note on Thursday. 

It said the domestic market obligation requirement comes as Indonesia, the world's largest palm oil producer, is in a bid to curb a rise in domestic cooking oil prices that had climbed about 40% year-on-year. 

“The unfavorable move will be negative for Malaysian upstream players that have significant exposure to Indonesia as they are required to sell a portion of their CPO products at a steep discount.

“Following the news, CPO futures rallied to a fresh record intraday high of RM5,700/MT before paring gains to close at RM5,587/MT. [We] maintain 'neutral' on the plantation sector,” said PublicInvest. 

At the time of writing on Thursday, the Bursa Malaysia Plantation Index had risen 20.62 points or 0.32% to 6,556.09. 

TSH Resources shares went down two sen or 1.79% to RM1.10, valuing the group at RM1.52 billion. KLK slipped 12 sen or 0.56% to RM21.48, with a market capitalisation of RM23.22 billion. 

Sime Darby Plantation shares rose seven sen or 1.98% to RM3.60, with a market value of RM24.9 billion. Genting Plantations inched up two sen or 0.31% to RM6.46, giving it a market value of RM5.8 billion.