Plantations
Maintain underweight. The lower-than-expected palm oil stocks at end-October will reinforce the current strength in crude palm oil (CPO) price, the root cause of which is worries over weather uncertainties. But we do not expect the weather concerns to be sustained beyond 1Q12 when La Nina is expected to go away.
We continue to expect CPO prices to trend lower in 2012 as prices will start to reflect the impact of slower global growth on demand. Also unchanged is our underweight rating on the Malaysian planters due to their more expensive valuations. Sime Darby remains our top pick.
October palm oil stocks fell 1.6% month-on-month (m-o-m) to 2.1 million tonnes, 2% below our forecast and 4.5% below consensus forecasts. The deviation came from higher-than-expected exports resulting from the attractive pricing of palm oil relative to soyabean oil during the period.
The lower-than-expected stockpile and concern that La Nina could disrupt oil palm harvesting during year-end monsoon could support near-term CPO price. But the weather risk premium on price may start to decline when La Nina subsides after 1Q12.
We maintain our view that CPO price will trend down in 2012 due to a potential slowing of demand growth on the back of lower biodiesel demand and improved weather conditions in South America. We are keeping our 2011 CPO price forecast of RM3,200 per tonne.
For 2012, we continue to expect it to decline 16% to RM2,700 before recovering by 4% to RM2,800.
We continue to underweight the Malaysian planters due to their rich valuations against regional peers, rising cost pressures and potential earnings risks for planters with exposure to the downstream business in Malaysia due to rising competition from its Indonesian peers. We like Sime Darby in Malaysia. Our top big-cap sells are IOI Corp Bhd and KL Kepong Bhd. — CIMB IB Research, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
Maintain underweight. The lower-than-expected palm oil stocks at end-October will reinforce the current strength in crude palm oil (CPO) price, the root cause of which is worries over weather uncertainties. But we do not expect the weather concerns to be sustained beyond 1Q12 when La Nina is expected to go away.
We continue to expect CPO prices to trend lower in 2012 as prices will start to reflect the impact of slower global growth on demand. Also unchanged is our underweight rating on the Malaysian planters due to their more expensive valuations. Sime Darby remains our top pick.
October palm oil stocks fell 1.6% month-on-month (m-o-m) to 2.1 million tonnes, 2% below our forecast and 4.5% below consensus forecasts. The deviation came from higher-than-expected exports resulting from the attractive pricing of palm oil relative to soyabean oil during the period.
The lower-than-expected stockpile and concern that La Nina could disrupt oil palm harvesting during year-end monsoon could support near-term CPO price. But the weather risk premium on price may start to decline when La Nina subsides after 1Q12.
We maintain our view that CPO price will trend down in 2012 due to a potential slowing of demand growth on the back of lower biodiesel demand and improved weather conditions in South America. We are keeping our 2011 CPO price forecast of RM3,200 per tonne.
For 2012, we continue to expect it to decline 16% to RM2,700 before recovering by 4% to RM2,800.
We continue to underweight the Malaysian planters due to their rich valuations against regional peers, rising cost pressures and potential earnings risks for planters with exposure to the downstream business in Malaysia due to rising competition from its Indonesian peers. We like Sime Darby in Malaysia. Our top big-cap sells are IOI Corp Bhd and KL Kepong Bhd. — CIMB IB Research, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
