Price corrected due to lower exports. In addition, the latest estimation for 1-20 Jun palm oil export showed a decline of 4.1% mom also lead to aggressive profit taking in the future markets. Based on the estimation by independent cargo surveyor Societe Generale de Surveillance, the declined was led by 66.6% mom drop in exports to India and -30.2% mom to Pakistan. While China has increased it palm oil import by 10.1% mom for 1-20 Jun 09.
Expecting profit-taking in plantation stocks. Malaysia-listed plantation stocks still holding well despite the 20% CPO price correction. We expect the sharp fall in CPO price yesterday should prompt profit-taking in the plantation sector, especially those Malaysia-listed companies.
But turning point to come by end-3Q. We are expecting CPO price to move up again in Aug/Sep on the back of the pick up in exports and also potentially lower than expected monthly production. This increase in CPO price in end-3Q to be supported by:
-Higher domestic demand for top 2 palm oil producers, i.e. Indonesia and Malaysia in preparation for Hari Raya Puasa.
- Exports to pick up in 2H. 2H would be a stronger half for exports due to the festive demand from India (Deepavali) and China (Mid-Autumn Festival), which showed higher demand in 2H vs 1H.
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