EUDR rules bring clarity for Malaysian planters, limited impact seen

KUALA LUMPUR: The EU Deforestation Regulation (EUDR) regulatory framework, set to take effect at the end of 2026, will provide Malaysian planters with greater implementation clarity, according to Hong Leong Investment Bank Bhd (HLIB). The implementing act, as opposed to the delegated act, will have a smaller impact on oil palm plantation companies, primarily focusing on technical rules for the EUDR Information System, including due diligence statements and contingency procedures.

HLIB anticipates minimal incremental compliance costs for Malaysian planters, especially those with existing exposure to the EU market, as they have already established traceability and due diligence systems required by the regulation. The bank maintains an Overweight stance on the sector, anticipating sustained elevated crude palm oil (CPO) prices through the second half of 2026 due to tightening supply and resilient demand.

HLIB recommends focusing on planters with predominantly upstream operations, particularly those with greater exposure to Malaysia, as they are better positioned to benefit from CPO price strength and have lower exposure to foreign regulatory and policy risks. The bank's top picks for investment include IOI Corp Bhd and Hup Seng Plantation Bhd.