In a research note today, the research firm said Indonesia has announced that it will waive its palm oil export levy until the end of August in a fresh attempt to boost shipments and reduce its overflowing stockpiles.

The export levy has been cut to zero from US$200 (RM888) per tonne for crude palm oil (CPO) starting from July 15, and the waiver also applies to other palm oil products.

CGS-CIMB said the market has partially priced in the Indonesia levy cut as Malaysia’s CPO price has fallen 21.6% to RM3,990 per tonne since June 28, after the Indonesia government revealed its intention to cut palm oil stocks.

“We also noticed that the price discount between Indonesia and Malaysia’s CPO prices narrowed to US$364 (RM1,619.80) per tonne from US$586 (RM2,607.70) per tonne on June 28, 2022, partially capturing the expectation of the levy cut of US$200 per tonne.

“It also appears that, based on CPO price trends, most of the expectation of the levy cut has been passed on to consumers to encourage demand,” it said, adding that the measure is expected to boost CPO prices in the medium term when stocks are successfully reduced to a more comfortable four to five million tonnes.

“Overall, we believe the market will turn more constructive on plantation companies with exposure to Indonesian estates once palm oil stocks in Indonesia fall to more manageable levels,” it said,

CGS-CIMB named Wilmar International Ltd, Kuala Lumpur Kepong Bhd and Darma Satya Nusantara Group as its top picks in the sector.