Sime Falls as Maybank Sees Palm Oil Price Falling

By Chan Tien Hin

April 13 (Bloomberg) -- Sime Darby Bhd., Malaysia’s biggest palm oil producer, fell the most in two weeks, leading a drop among plantation stocks after Maybank Investment Bank Bhd. said prices of the edible oil are poised to slide in the second half.

Shares of Sime tumbled 2.3 percent to 6.35 ringgit at 2:32 p.m. local time in Kuala Lumpur, set for the steepest slide since March 30. The drop accounted for more than half of the benchmark Composite Index’s decline. Sime, the largest stock by market value, has jumped 22 percent this year. Kuala Lumpur Kepong Bhd. slid 1.7 percent to 11.30 ringgit.

“We remain wary of the unsustainable” palm oil price over the next two months, Ong Chee Ting, an analyst at Maybank Investment, said in a report today. The price is poised for a “correction” because of rising production and the global recession, he said. He kept his “underweight” rating on the palm oil industry.

Palm oil futures in Malaysia, the global benchmark, advanced for a third day, rising 2.6 percent to 2,359 ringgit, set for the highest level since Sept. 12, after stockpiles last month dropped faster than output rose. They have surged 39 percent this year.

Prices of the edible oil may average 1,600 ringgit a ton in the second half as the global recession saps demand and the discount between palm oil and rival soybean oil narrows, said Ong.

“We may see a rebound in inventory by May,” he said.

Shares of the biggest planters such as Sime and Kuala Lumpur Kepong “remain stretched” and face the risk of “potential de-rating as global market sentiment may only bottom” in the second half of the year, he said.

Sime’s 14-day relative strength index, which shows how rapidly prices have advanced or dropped, rose above 70 for the first time since January 2008, the level that some investors use as a trigger to sell.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net