KUALA LUMPUR (July 8): Indonesia’s planned implementation of the B50 diesel mandate alongside the possibility of a “super” El Nino will likely keep crude palm oil (CPO) stocks elevated for 2026, Hong Leong Investment Bank (HLIB) said in a Wednesday statement.

Reflecting this, HLIB has maintained its 'overweight' recommendation for Malaysian plantation stocks, stating that tightening supply conditions and resilient demand will likely keep CPO prices elevated throughout 2H2026.

The research house has additionally raised its 2026-2027 average CPO price assumptions by RM100 per metric ton (MT), to a sizeable RM4,450 per MT and RM4,300 per MT.

“Based on our estimates, every RM100/mt increase in our average CPO price projection would lift earnings of plantation companies under our coverage by 3%-8%,” HLIB said, noting that the assumption would be incorporated into its target prices and earnings forecasts in the upcoming results season.

If implemented successfully, the B50 diesel mandate will likely increase Indonesian demand for palm-based biodiesel, thus absorbing a large portion of the country’s palm oil production output.

With lower volumes of CPO being able to be exported, Malaysia would be able to take advantage of the tightening supply-demand globally.

According to the National Ocean & Atmospheric Association (NOAA), the current El Nino weather phenomenon is expected to intensify to a moderate or strong level by fall, causing lags in palm oil growth. 

However, the house forecasts El Nino to be a potential support to CPO prices as a silver lining.

“While El Niño’s effect on palm oil production typically lags — often emerging 12-24 months after the event as moisture stress affects FFB (fresh fruit bunch) yields — CPO prices tend to respond much earlier,” HLIB noted.

At present, CPO is priced at RM4,543 per tonne on the Bursa Malaysia Exchange, boosted by recent shipping disruptions in the Middle East.

The house has additionally listed SD Guthrie Bhd (KL:SDG) and Hap Seng Plantations Holdings Bhd (KL:HSPLANT) as top picks with a target price of RM7.05 and RM2.89 respectively, due to their predominantly upstream enterprise and exposure to Malaysia operations.