El Nino could affect plantations by year end
KUCHING: A possible return of the El Nino cycle towards the year end could impact planters going into 2019.
There is a 60 per cent chance for El Nino to make an appearance during the fall and this rises to about 70 per cent by winter 2018/19. AffinHwang Capital
According to the resarch arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital), El Nino could make an appearance towards year-end based on statistics from the US National Oceanic andf Atmospheric Administration (NOAA) in its climate advisory report.
“There is a 60 per cent chance for El Nino to make an appearance during the fall and this rises to about 70 per cent by winter 2018/19,” it forewarned in a sector report yesterday.
The El Nino-Southern Oscillation (ENSO) cycle can greatly influence the global weather, as these cycles can alter the normal weather patterns and surface temperatures, which can cause major disruption to the world’s agricultural production and supply.
This comes as Malaysia reported palm oil figures for August with crude palm oil’s (CP) production rose 7.9 per cent month-on-month ( m- o- m) to 1.62 million metric tonnes (MT).
This was below MIDF Amanah Investment Bank Bhd’s (MIDF Research) forecasts of 1.70 million MT and consensus’ 1.65 million MT, likely due to the lingering effect of El Nino in 2015 and La Nina in 2016/2017 in Sabah.
“While the August- October period is typically a peak production season, we believe September’s output would fall short of its fiveyear average production of 1.85 million MT,” it said in a separate note.
“From our channel checks with planters, we gather that there has been a change in cropping patterns in Sabah plantations, due to El Nino and La Nina as noted. This has adversely affected pollination and fruit sets, resulting in weakerthan-usual production for the past few months.
“However, most of the planters said that the effect is already subsiding, and production is likely to pick up in the coming months. As such, we believe this year’s peak production period would take place in October-November; and we forecast September output to increase nine per cent m-o-m to 1.77 million MT.”
On another point, MIDF Research believed tree stress continued for palm oil as production declined year on year (y-o-y) consecutively for the fourth month.
“Palm oil production grew by eight per cent m-o-m to 1.62 million tonnes in August. However, a closer look shows that August production represents the fourth y-o-y decline in production as it was down 10 per cent y-o-y.
“This confirms our previous belief that the tree stress period has started.”
KUCHING: Malaysia Airports Holdings Bhd’s ( MAHB) strong momentum of traffic flow has been projected by analysts to continue, led by the group’s international segment.
According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), the momentum of the international sector for Malaysia has remained consistently above 4.2 million passengers for the past three months.
This, MIDF Research opined will help to expand the traffic percentage of high value passengers moving forward.
“Accordingly, we expect the seasonal factors such as China Golden Week and school holidays will continue to lend support to MAHB’s earnings for the rest of the year,” the research arm said.
“We believe the strong momentum of traffic flow to continue, which will be led by the international segment.”
MIDF Research premised its expectations on the robust air travel demand.
“Chinese tourists are still expected to be the driver, due to supportive visa policies in Malaysia.”
The research arm recalled that Chinese accounted for 10 per cent of Asian tourists in 2017, under which the number of passengers have grown at a three-year compound annual growth rate ( CAGR) of 10.8 per cent annually.
Meanwhile, the research arm of Kenanga Investment Bank Bhd believed that in the near term, management is working relentlessly to meet the Malaysian Aviation Commission’s ( MAVCOM) Quality of Service (QoS) framework, which is to be rolled out in stages.
Kenanga Research recapped that management has planned capital expenditure ( CAPEX) of RM600 million to RM700 million over two to three years to upgrade their infrastructure to meet or exceed QoS requirement.
“That said, we are also anticipating the study on new passenger service charge ( PSC) charges from MAVCOM that could be favourable or detrimental to MAHB’s prospects,” the research arm noted.