Singapore-listed palm oil stocks seen benefiting as prices rise, ESG risks ease
Plantation stocks in Malaysia and Indonesia may rebound as tighter palm oil supplies and easing ESG risks attract investors. Strong demand from India and China, rising crude palm oil prices, and Singapore’s $5 billion fund support could lift shares of First Resources, Bumitama Agri, Kencana Agri, Indofood Agri, and Golden Agri-Resources.
Plantation stocks, which have lagged behind rising palm oil prices for much of the past decade, could make a comeback as tighter supply and easing environmental, social and governance (ESG) risks draw investors back.
Some counters could also benefit from further capital inflows in the months ahead, as selected asset managers prepare to deploy funds into promising Singapore stocks as part of a Government-led effort to boost the local stock market.
In an Oct 2 report, Aletheia Capital analyst Nirgunan Tiruchelvam noted that tighter crude palm oil (CPO) supplies and strong demand from Asia are expected to drive up prices, with India set to increase palm oil imports and China likely to continue buying as its economy recovers.
Combined with volatile weather patterns such as El Nino, global palm oil supplies could fall to a multi-year low by 2027, pushing prices even higher, Mr Tiruchelvam said.
He expects CPO prices to grow by about 10 per cent per year over the next few years, averaging US$1,060 per tonne in 2025, US$1,166 in 2026 and US$1,282 in 2027, compared with the current spot price of US$962.
In addition, a rollback of environmental rules under US President Donald Trump’s administration could ease the ESG constraints on the sector.
Over the past decade, many investors have steered clear of oil palm plantation stocks in Malaysia and Indonesia due to environmental concerns such as deforestation and biodiversity loss, which posed both reputational and financial risks.
As a result, despite palm oil prices doubling during that time, plantation stocks have underperformed the rest of the market, with the correlation between plantation valuations and palm oil prices falling to 42 per cent since 2015 compared with 83 per cent between 1995 and 2015, according to Mr Tiruchelvam.
But now that US regulators are rolling back requirements such as ESG disclosures and anti-greenwashing proposals, the analyst is betting that interest will return to the sector.
Already, shares of the five plantation stocks listed on the Singapore Exchange – First Resources, Bumitama Agri, Kencana Agri, Indofood Agri Resources and Golden Agri-Resources – have jumped between 15 per cent and 260 per cent since Mr Trump took office at the start of 2025.
On Oct 2, Aletheia Capital initiated coverage on Bumitama Agri, First Resources, Indofood Agri and Kencana Agri with “buy” recommendations.
“We expect these plantation stocks to benefit from rising palm oil prices, young estate profiles, high oil extraction rates and integrated operations that help protect margins,” Mr Tiruchelvam said.
He cautioned, however, that bumper harvests of alternative edible oils such as soya bean in the US, Brazil or Argentina could drive down CPO prices, but noted that strong dividends, solid balance sheets and easing ESG concerns could support local plantation stocks and attract investors.
The Monetary Authority of Singapore’s (MAS) plan to allocate $5 billion to fund managers for seeding investments in promising mid-cap companies could also benefit several palm oil stocks.
On Oct 6, Fullerton Fund Management launched the first retail fund under the MAS programme. The new fund, called Fullerton Singapore Value-Up, will invest exclusively in Singapore-listed securities, covering small-, mid- and large-cap stocks. The fund manager did not provide a list of counters that it plans to invest in.
In research reports issue earlier in 2025, both UOB Kay Hian and Maybank Research said they expect First Resources to attract a share of the investments, while Maybank forecasts that Golden Agri-Resources could also benefit.
First Resources is a constituent of the iEdge Singapore Next 50 indexes, which were launched on Sept 22. They track the 50 largest stocks by market capitalisation and liquidity, after excluding the 30 blue-chip stocks on the Straits Times Index.
Investors can also get exposure to palm oil through agribusiness giant Wilmar International, which cultivates and processes palm oil among its other businesses.
Shares of Wilmar have fallen since the start of 2025. They plunged further in late September when the company was found guilty of corruption after Indonesia’s Supreme Court overturned its previous acquittal in a graft case involving cooking oil export permits during the nation’s shortage crisis in 2021 and 2022.
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Source : Ukr Agro Consult
