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News Admin
 
Date
 07/09/2006
News Provider
 Mahamad Rodzi Abdul Ghani
News Source
 Reuters
Headline
 SE Asia Stocks-Malaysia falls on plantation shares as oil drops

SINGAPORE, Sept 6 (Reuters) - Malaysian shares fell on Wednesday as lower oil prices, which fell to levels last seen in June, prompted investors to sell plantation stocks such as IOI Corp. .

Malaysian shares lost 0.43 percent, but markets elsewhere rose. Singapore's key Straits Times Index added 0.18 percent, Indonesian stocks rose 0.09 percent, the Philippine index rose 0.15 percent, and Thai stocks was inched 0.05 percent higher by 0515 GMT.

In Kuala Lumpur, shares in palm oil plantations fell as investors speculated that lower oil prices may cut demand for crude palm oil, which is used to produce alternative fuels such as biodiesel.

IOI Corp., Malaysia's biggest palm oil producer by stock market value, lost 4.6 percent. Plantation group Kuala Lumpur Kepong was off 1.7 percent, while Golden Hope Plantations fell 0.4 percent.

"Plantation stocks are a good play on oil prices, but they are looking frothy," said a fund manager in Kuala Lumpur. He said biodiesel was profitable as long as oil prices stay above $50.

The Malaysian plantation index has gained 32.5 percent in the year to date, compared with a 6.7 percent rise in the Malaysian composite stock index.

Oil prices, which steadied below $69 a barrel on Wednesday, have shed about 13 percent since hitting a record high of $78.4 on July 14, weighed down by an unexpectedly calm hurricane season this year, and the perception of reduced risk to Iran's oil exports.

Looking ahead, the fund manager said shares in Kuala Lumpur may rise in the month ahead as investors seek out good dividend plays in Malaysia amid choppy regional markets.

"Malaysia is quite a good place place to hide when regional markets are volatile," he said, adding that he likes blue chips such as Malayan Banking for its dividend yield.

Malayan Banking , Malaysia's largest lender, has a current dividend yield of 7.5 percent, Reuters data showed. The stock was down 0.9 percent.

In Singapore, gains were led by a 0.8 percent rise in CapitaLand , Southeast Asia's largest developer.

Analysts said investors bought property stocks on hopes that their profits may be boosted by Singapore's two planned casino resorts, expectations that U.S. interest rates have peaked, as well as the International Monetary Fund (IMF) and World Bank meetings in Singapore in the next two weeks.

"There is a lot of optimism about property stocks lately," said Loh Hoon Sun, managing director at Phillip Securities. "The IMF meetings should be a positive factor."

Local media said on Wednesday that the meetings, which run from September 13 to 20, will lift average hotel room rates in Singapore by at least 25 percent.

Other property stocks were higher in Singapore as well. City Developments rose 1 percent, while Keppel Land added 0.9 percent.

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