RHB Investment Bank Bhd (RHB Research) maintained its OVERWEIGHT call on the plantation sector, citing expectations that crude palm oil (CPO) prices will remain supported as a stronger El Nino event could tighten supply towards the end of 2026.
The research house retained its top picks including Johor Plantations, Sarawak Oil Palms, IOI Corp, Hap Seng Plantations, SD Guthrie, Triputra Agro Persada and First Resources.
RHB Research said its recent CPO outlook event reinforced its view that palm oil prices could gain an upside bias into year-end as the impact of El Nino becomes more visible. The research house noted that forecasts from the US National Oceanic and Atmospheric Administration and the Australian Bureau of Meteorology are pointing towards a strong to very strong El Nino event, with a 97% chance of such conditions occurring between October and December.
The research house highlighted that Malaysian Palm Oil Board (MPOB) agronomists expect fresh fruit bunch yields to decline 10% to 14% in the first year of an El Nino event, followed by a further 3% to 4% decline if dry conditions persist. RHB Research said the impact is expected to peak between October 2026 and January 2027, with Johor, Pahang, Negeri Sembilan and Sabah among the areas most vulnerable.
RHB Research also pointed to Indonesia’s B50 biodiesel mandate, effective from July 2026, as a structural factor supporting CPO prices. The policy requires around 18 million tonnes of CPO annually, representing more than 35% of Indonesia’s total production and tightening global supply.
The research house maintained its CPO price assumptions at RM4,400 per tonne for 2026 and RM4,300 per tonne for 2027, while noting that upside risks remain for its 2027 forecast due to the 12-month lag effect from El Nino. It added that MPOB expects average 2026 CPO prices to remain between RM4,300 and RM4,500 per tonne, with prices unlikely to fall below RM4,000 in the near term.
