Agricultural products-related stocks are likely to have an upper hand, given the optimistic outlook for palm oil prices globally, Singapore Exchange said on Wednesday.
Palm oil prices for the rest of 2017 are projected to remain firm on the back of seasonally strong fourth quarter, said Bloomberg Intelligence analyst Alvin Tai in a report dated November 21.
A further boost could come from weaker-than-expected output, as parts of Borneo struggle with the tail-end effects of the El Nino drought, as well as a cut in Europe's import tariffs for Indonesia's biodiesel, anticipated in the fourth quarter, Tan said.
SGX lists eight agricultural products stocks with a combined market capitalisation of S$29 billion.
Year-to-date, these stocks averaged a -13.7 percent price change, compared to +16.7 percent in 2016.
Zion Market Research forecasted the global palm oil market to grow at a CAGR of 7.2 percent between 2016 and 2021.
Growth drivers include higher living standards, changing eating habits, growing demand for vegetable oil as a feedstock for biodiesel production as well as low prices compared to soybean and other vegetable oils, SGX said.
Wilmar, the world's largest processor and merchandiser of palm and lauric oils, expects the good performance in its Oilseeds & Grains segment to continue into the fourth quarter.
Meanwhile, Golden Agri, the world's second-largest palm oil plantation company, said it expects crude palm oil prices to remain supported by global demand growth, including the tight stock position and implementation of the biodiesel mandate in Indonesia.