The KLCI closed at a record high of 1681 points last Friday, with plantation stocks among the top performers. However, the plantation sector has been underperforming the rest of the market the last few months, just like how QPR has been underperforming this season in the Premier League despite having spent millions of our airfare tickets on overpaid players..
The Plantation sector headed for a performance nosedive since July this year compared with the KLCI (red indicates KLCI, green indicates plantation)
This is mainly blamed to the oversupply of palm oil and weak global demand. The listing of FGV didn't help either. Its shares have plunged by 79 sen (around 15%) at the time of writing since it was listed. This apparently pissed off enough Felda settlers that they decided to take to the streets to protest against the group's chairman last Friday. I'm not sure but this must be the first time in Malaysia we've seen shareholders taking it to the streets to protest against an underperforming company.
With the new year approaching perhaps there is some brief light at the end of the shady oil palm plantation? Tax cuts on Malaysia crude palm oil exports from the current 22-23% to 4.5-8.5% are set to take place on 1 Jan 2013.. There could be some short term gain to capitalise here. However, any upside will probably be limited unless macroeconomic conditions improve significantly.
Above is a a chart of the KLSE Plantation index from year 2003. Since the 2008 economic crisis, the plantation sector has been climbing.. a small upside may be seen in January but a larger correction might take place in 2013
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