Sunday, July 20, 2008
Palm oil stocks take a bashing too
Our palm oil has always been regarded as a saviour but rising costs, increased regulatory risks and a slowdown in earnings momentum have suddenly contributed to a decline. Last week, the biggest losers were Kuala Lumpur Kepong, IOI Corp, Kulim and Asiatic Development, with CPO prices falling to a two-month low of RM3,388 a tonne, last Friday, from some RM4,300 in March. As The Edge correctly reported, the plantation sector has always been a cushion for the economy at a time when manufacturing sector has been hit by a weak global demand. Analysts are still optimistic, particularly with strong demand from China but there is a lesson to learn here - we cannot just depend on palm oil and crude oil in the long run. Over the past decades, these two sectors have helped Malaysia ride through through the toughest economic period. But the dip in the performance of these palm oil stocks should jolt us out of our comfort zone. With the world heading towards a recession, if not depression, we have reason to be very concerned. Let's hope there is a rebound soon. But the reality is that we have to find new sources of income for Malaysia.