CPO ex­ports ex­pected to weaken

The Sun (Malaysia) - - SUNBIZ -

PE­TAL­ING JAYA: While ex­ports have surged for two con­sec­u­tive months ahead of the Mid-Au­tumn and Di­wali cel­e­bra­tions, Hong Leong In­vest­ment Bank (HLIB) Re­search ex­pects crude palm oil (CPO) ex­ports to weaken mov­ing into the fol­low­ing month due to the ab­sence of ma­jor fes­tiv­i­ties that push de­mand for the com­mod­ity.

The re­search house said the ex­pec­ta­tion of lower ex­ports is also be­cause of the di­min­ished price com­pet­i­tive­ness of palm oil over soy­oil, which curbs de­mand for palm oil.

CPO ex­ports jumped 30.9% month-on­month to 1.81 mil­lion tonnes in Au­gust on the back of re­stock­ing ac­tiv­i­ties ahead fes­tive cel­e­bra­tions, ev­i­denced by 41.7% and 125.8% month-on-month in­creases in ex­ports to China and In­dia.

As the rise in ex­ports mit­i­gated higher out­put, Malaysia’s CPO stock­pile fell 17.3% month-on-month to 1.46 mil­lion tonnes in Au­gust, the low­est in more than five years since Jan­uary 2011.

MIDF Re­search said Malaysia’s palm oil in­ven­tory level of 1.46 mil­lion tonnes as of end-Au­gust is 10% below con­sen­sus es­ti­mate of 1.63 mil­lion tonnes and 17% below its es­ti­mate of 1.76 mil­lion tonnes.

As CPO prices con­tinue to hold well amid a grad­ual re­cov­ery in fresh fruit bunch (FFB) pro­duc­tion, PublicIn­vest Re­search sees a sig­nif­i­cant re­bound in the plan­ta­tion sec­tor’s earn­ings for the com­ing quar­ters.

“We re­main pos­i­tive on the CPO out­look with an av­er­age CPO prices fore­cast of RM2,500 for 2016 and RM2,600 per tonne for 2017,” it noted.

HLIB Re­search is main­tain­ing a neu­tral stance on the plan­ta­tion sec­tor, with pro­jected av­er­age CPO prices of RM2,400 and RM2,500 a tonne for 2016 and 2017 re­spec­tively.

Mean­while, MIDF Re­search re­tains its pos­i­tive view on the sec­tor, with Kuala Lumpur Ke­pong Bhd as its top pick, as its earn­ings are ex­pected to ben­e­fit from bullish CPO prices due to its high ex­po­sure to the palm oil busi­ness and good earn­ings growth of 41% year-on-year to RM536 mil­lion in the first half of fi­nan­cial year 2016.

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