Palm Oil Shares Fall as Much as 6.7% After Singapore Notices to 10 Companies
Key Facts
Shares of First Resources and Bumitama Agri fell in trading on Oct. 26 after the companies received notices from Singapore’s National Environment Agency after the market close on Oct. 23. Bumitama Agri fell as much as 6.7% at the open, while First Resources’ maximum decline was 4.9%. The shares later recovered part of their losses by noon, according to The Straits Times. The notices are part of a broader move involving 10 Singapore-listed companies operating in the palm oil or forestry sectors. The agency requested documents and information to facilitate an investigation into possible links to haze; receiving a notice does not establish any company’s responsibility.
First Resources recorded its steepest intraday decline at S$3.50, down 18 cents, or 4.9%, from its previous close of S$3.68 on Oct. 23. By noon on Oct. 26, the stock had recovered to S$3.64, according to the newspaper. Bumitama Agri fell 11 cents to S$1.52 at the open, compared with its Oct. 23 close of S$1.63. Its maximum decline was 6.7% before it rose to S$1.61 by noon. The share movements show that the initial sell-off eased during the session as investors absorbed news of the notices.
The National Environment Agency said the 10 Singapore-listed companies operate in the palm oil or forestry sectors and hold land concessions in Indonesia or are linked to companies that hold such concessions. The requested information includes links between relevant companies in Singapore and Indonesia, the locations of land concessions, and measures taken to prevent and manage fires on Indonesian plantations. The agency said it is seeking information on companies that “may have contributed to the haze in Singapore,” as well as their operations and fire-prevention and control measures. The scope of the request covers corporate and operational facts related to the land, including firefighting efforts during the dry season. The scrutiny therefore extended from companies directly managing concessions to those linked through their corporate structures.
The agency had sent preventive-measures notices to seven companies in Indonesia on Oct. 16 over fires in Sumatra, then to three more companies on Oct. 19 over fires in Kalimantan. The NEA said there were indications that smoke from fires on land within the first seven companies’ concessions “may have reached Singapore.” Those companies were asked to take measures to extinguish fires and prevent their spread, stop burning and submit action plans. In its air-quality update on Oct. 23, the agency said dry conditions persisted and one-hour PM2.5 readings ranged from 70 to 98 micrograms per cubic meter. The 24-hour Pollutant Standards Index (PSI) was between 85 and 108 that day.
The Transboundary Haze Pollution Act allows Singaporean authorities to pursue companies that may be linked to fires and haze carried across borders. The law provides for a fine of up to S$100,000 for each day or part of a day on which haze associated with the offense occurs, with an overall fine cap of S$2,000,000. Bumitama Agri said in a disclosure published on Oct. 24 that it had received a notice from the National Environment Agency seeking documents and information under Section 10(1) of the act. The disclosure sets out the legal basis for the request made to the company, while the notices remain part of information gathering and an investigation. The notice itself does not establish that the company committed an offense or make it responsible for the haze.
Singapore’s Ministry of Law said the government would establish an expert panel comprising law, audit and investigative firms to examine companies’ operations, corporate structures and supply chains. It added that the conduct of local and foreign companies, their corporate links and supply chains would be examined to determine whether they caused or condoned the fires. Government agencies and the Attorney-General’s Chambers will assess the panel’s findings. In its announcement on Oct. 23, the ministry said further details on the review and possible links to the haze would be issued the following week. The government review’s findings and companies’ forthcoming disclosures are therefore central to the case’s next developments.