October 16, 2024

 

Drop in Malaysian poultry stocks following government's announcement of potential end to egg subsidies 

 

 

Poultry stocks on Bursa Malaysia, Malaysia's stock exchange, fell in active trade on October 9, after the government said it was considering removing subsidies for eggs.

 

Teo Seng Capital Bhd (KL) led the decline, dropping over 10% to RM2.20 (US$0.47), after more than five million shares changed hands. Leong Hup International Bhd (KL), the country's largest poultry company, slid 2% to 73.5 sen (US$0.16).

 

"The sell-off among poultry stocks might not necessarily be related to the government's potential removal of egg subsidy," said Loui Low, head of research at Malacca Securities.

 

Low said since eggs are an essential item, ending the subsidy wouldn't likely lead to a significant decrease in consumer demand. On the contrary, he noted, this could present an upside potential, boosting earnings for poultry and egg companies.

 

"The appreciation of the ringgit [against the US dollar], which reduces input costs for chicken feed, would have a more significant impact on poultry companies' earnings. Therefore, I believe the sell-off in these stocks may not persist," Low added.

 

The Ministry of Agriculture and Food Security is currently reviewing subsidies for all three grades of chicken eggs, Bernama reported on October 9, citing its minister Datuk Seri Mohamad Sabu.

 

Ending the egg subsidy could save the government RM100 million (US$21.5 million) per month, which could be redirected to develop other critical areas of the agro-food sector, the minister was quoted as saying by the state news agency.

 

"A proposal has been submitted to the Ministry of Finance and the Ministry of Domestic Trade and Cost of Living," Mohamad said.

 

Currently, egg producers are given a subsidy at a rate of 10 sen (US$0.02) per egg, while the ceiling retail prices for Grade A, B, and C chicken eggs are set at 42 sen (US$0.09), 40 sen (US$0.09), and 38 sen (US$0.08) per egg.

 

Other poultry-related stocks also saw declines, including Lay Hong Bhd (KL), which dropped one sen (US$0.0026) or 2.63% to 37 sen (US$0.08); PWF Corp Bhd (KL), which dipped half a sen (US$0.0013) or 0.55% to 90 sen (US$0.19); and LTKM Bhd (KL), whose shares fell three sen (US$0.007) or 2.16%. CAB Cakaran Corp Bhd's (KL) share price ticked down by 1.53%, or one sen (US$0.0026), to 64.5 sen (US$0.14).

 

TPC Plus Bhd (KL) also fell half a sen (US$0.0013) or 1.37% to 36 sen (US$0.08). In contrast, QL Resources (KL) edged up one sen (US$0.0026) or 0.21% to RM4.70 (US$1.02).

 

- The Edge Malaysia