Astounding increase in exports to China by 94 per cent

Despite exports coming in lower for October, researchers with Kenanga Investment Bank Bhd ( Kenanga Research) observed an astounding increase in exports to China — a growth of 94.2 per cent on a monthly basis — which is a possible sign of the country fulfilling its pledge to increase CPO imports from Malaysia.

“While we observed lower exports to India ( a drop by 56.5 per cent m- o-m) and the European Union (a dip of 27.2 per cent m- o-m), it is noteworthy that cumulative purchases up to October 2018 from the countries were still up nine and two per cents year on year, respectively

“Despite strong production and a potential CPO price recovery in the coming months, we maintain our neutral stance on the sector as uncertainties vis- à-vis trade war prevail, which continue to hurt the industry’s sentiment and cap further upsides to CPO prices beyond our assumptions.

“Hence, we are not particularly excited about the plantation sector over the near- term and recommend investors to be selective in seeking exposure into the sector.”

Analyst Alam Lim from MIDF Amanah Investment Bank Bhd ( MIDF Research) maintained his average CPO price forecast of RM2,400 per tonne for 2018.

On this, Kenanga Research expect CPO prices to recover to RM2,200 to RM2,250 levels in December on a likely seasonal production slowdown and other recent supportive events including Indonesia’s extension of B20 mandate and China’s pledge to increase CPO imports from Malaysia.

“Our 2018E CPO price forecast remains unchanged at RM2,300 per metric tonne,” it added.