MARKET DEVELOPMENT
Firmer CPO Price Seen in Coming Months - Research
Firmer CPO Price Seen in Coming Months - Research
29/09/2015 (Borneo Post) - The price of crude palm oil (CPO) is expected to trade firmer over the next few months.
Affin Hwang Investment Bank Bhd (Affin Hwang) yesterday said prices of CPO futures contracts continued to point to higher CPO prices in the coming months as the on-going El Nino phenomena gathers strength.
The research firm observed prices of three-month CPO futures contracts have staged a 20 per cent recovery in the last four weeks to close at RM2,240 per metric tonne (MT) recently after it slid from a high of RM2,341 per MT in June 2015 to the year’s low of RM1,867 per MT earlier this month.
While the CPO price recovery was attributed to the weakness of the ringgit against the US dollar, prices of CPO futures contracts have also remained firm despite the high palm oil inventory level of 2.49 million MT in August 2015.
Thus, Affin Hwang expects CPO selling prices to firm from an average of RM2,150 per MT in 2015 to RM2,400 per MT in 2016 or 2017.
Nevertheless, challenges remain for CPO price to remain sustainable over the long run including short-term economic uncertainties, weak crude oil prices and plentiful supply of oilseeds.
However, Affin Hwang sees a number of positives which will lead to its projected moderate 12 per cent increase in CPO average selling prices to RM2,400 per MT in 2016 or 2017.
It explained the factors include the impact of the El Nino event which might be more severe in 2016, unexcessive stock or export ratio, Malaysia and Indonesia to announce plans to stabilise prices and global economic growth to pick up in 2016 and 2017.
Affin Hwang said a stronger global economy is positive for vegetable oils in general and palm oil in particular.
It believed any parallel recovery in crude oil price will also benefit palm oil through higher demand for palm-based derivatives and biodiesel.
The research firm also believed the worse for the CPO price downtrend could be over unless the global economic outlook deteriorates further.
Hence, Affin Hwang maintained its CPO average selling price assumption of RM2,150 per MT for 2015 and a 12 per cent increase to RM2,400 per MT for 2016 to 2017.
The research firm observed prices of plantation stocks have so far proven resilient in spite of market volatilities.
At current stock prices, Affin Hwang noted stock recommendations were mostly at ‘hold’ and the plantation sector rating was unchanged at ‘neutral’.
Therefore, the research firm advised investors to look for trading opportunities on market weakness.
The sharp dips in August to September 2014 and this year’s CPO prices followed by significant rebound were indicative of RM2,000 per MT being a good support level for the CPO price.
Affin Hwang Investment Bank Bhd (Affin Hwang) yesterday said prices of CPO futures contracts continued to point to higher CPO prices in the coming months as the on-going El Nino phenomena gathers strength.
The research firm observed prices of three-month CPO futures contracts have staged a 20 per cent recovery in the last four weeks to close at RM2,240 per metric tonne (MT) recently after it slid from a high of RM2,341 per MT in June 2015 to the year’s low of RM1,867 per MT earlier this month.
While the CPO price recovery was attributed to the weakness of the ringgit against the US dollar, prices of CPO futures contracts have also remained firm despite the high palm oil inventory level of 2.49 million MT in August 2015.
Thus, Affin Hwang expects CPO selling prices to firm from an average of RM2,150 per MT in 2015 to RM2,400 per MT in 2016 or 2017.
Nevertheless, challenges remain for CPO price to remain sustainable over the long run including short-term economic uncertainties, weak crude oil prices and plentiful supply of oilseeds.
However, Affin Hwang sees a number of positives which will lead to its projected moderate 12 per cent increase in CPO average selling prices to RM2,400 per MT in 2016 or 2017.
It explained the factors include the impact of the El Nino event which might be more severe in 2016, unexcessive stock or export ratio, Malaysia and Indonesia to announce plans to stabilise prices and global economic growth to pick up in 2016 and 2017.
Affin Hwang said a stronger global economy is positive for vegetable oils in general and palm oil in particular.
It believed any parallel recovery in crude oil price will also benefit palm oil through higher demand for palm-based derivatives and biodiesel.
The research firm also believed the worse for the CPO price downtrend could be over unless the global economic outlook deteriorates further.
Hence, Affin Hwang maintained its CPO average selling price assumption of RM2,150 per MT for 2015 and a 12 per cent increase to RM2,400 per MT for 2016 to 2017.
The research firm observed prices of plantation stocks have so far proven resilient in spite of market volatilities.
At current stock prices, Affin Hwang noted stock recommendations were mostly at ‘hold’ and the plantation sector rating was unchanged at ‘neutral’.
Therefore, the research firm advised investors to look for trading opportunities on market weakness.
The sharp dips in August to September 2014 and this year’s CPO prices followed by significant rebound were indicative of RM2,000 per MT being a good support level for the CPO price.