11/11/2008 (The Star Online), Kuala Lumpur - HwangDBS Vickers Research is maintaining a cautious stance on the palm oil sector and believes the recent recovery in the crude palm oil (CPO) price might not last.

“The recent recovery in palm oil prices was a welcome break from the steep fall since July 2008, but we do not expect the recovery to last,” it said in a research note issued on Tuesday.

The research house said any strength in crude oil price should have lesser impact on CPO prices, given the anticipated increase in stock/usage ratio for the rest of the year.

HwangDBS Vickers Research said the joint efforts by the Indonesian, Malaysian or even Chinese Government to stimulate demand would take time, and hence, short term optimism would be unfounded.

It added the recent improvement in demand was due to a temporary surge for the Chinese New Year festive season, and it expected that to recede by January.

“For these reasons, we believe our current assumed CPO price of RM2,190 per tonne for next year could be aggressive. We are reviewing our CPO price assumptions with a downside bias, and maintain a cautious stance on the sector,” it said.

The Malaysian Palm Oil Board (MPOB) October data showed palm oil production rose 4.6% month-on-month to 1.652 million tonnes, while exports improved 3.0% to 1.336 million tonnes.

The research house said the difference added to the previous month’s already high inventory level, which included 30,000 tonnes of imports from Indonesia, rose to 2.086 million tonnes.

Year-to-date, October production volume was 14.594 million tonnes, up 14.2% year-on-year.

This volume was within its full year expectations of 17.5 million tonnes (up 10.7% year-on-year).

Including Indonesia, it expected CPO production to grow by 9.9% this year to 36.5 million tonnes.