MARKET DEVELOPMENT
Plantation Sector To Be Stronger Next Year, Says RHB Research
Plantation Sector To Be Stronger Next Year, Says RHB Research
20/07/2013 (Bernama) - RHB Research expects the plantation sector to be stronger next year, with average crude palm oil (CPO) price to be better at RM2,600 per tonne on higher demand against the backdrop of an improved global economy.
"We believe investors wanting to buy into the sector should wait and buy in September or October as market volatility is typically at its highest by then, representing an opportunity to buy cheap.
"Furthermore, the risk of surging palm oil inventory will also diminish by then," it said in a research note today.
The research firm's top picks for the sector include First Resources, Bumitama Agri and Sarawak Oil Palms, as these stocks would likely be the best performers given the production growth coupled with manageable level of young mature trees.
Meanwhile, for the second half of this year, RHB Research expects production to be still healthy, capping the upside for CPO price.
"Malaysia's CPO production is likely to cross the 19 million tonne level this year, up from 18.8 million tonnes previously, however, we do not think there will be an oversupply situation serious enough to cause a price crash," it said.
Demand from the two biggest edible oil consumers in the world, China and India, is also expected to continue building up this year.
"India's edible oil imports grew by 12 per cent while its imports of palm oil grew by 27 per cent in the first six months of this year.
"In China's case, edible oil imports grew by 23 per cent, while palm oil imports grew by 14 per cent in the first five months of 2013.
"Malaysia's total palm oil exports for the first six months of this year grew by seven per cent to 8.4 million tonnes," the research house added.
"We believe investors wanting to buy into the sector should wait and buy in September or October as market volatility is typically at its highest by then, representing an opportunity to buy cheap.
"Furthermore, the risk of surging palm oil inventory will also diminish by then," it said in a research note today.
The research firm's top picks for the sector include First Resources, Bumitama Agri and Sarawak Oil Palms, as these stocks would likely be the best performers given the production growth coupled with manageable level of young mature trees.
Meanwhile, for the second half of this year, RHB Research expects production to be still healthy, capping the upside for CPO price.
"Malaysia's CPO production is likely to cross the 19 million tonne level this year, up from 18.8 million tonnes previously, however, we do not think there will be an oversupply situation serious enough to cause a price crash," it said.
Demand from the two biggest edible oil consumers in the world, China and India, is also expected to continue building up this year.
"India's edible oil imports grew by 12 per cent while its imports of palm oil grew by 27 per cent in the first six months of this year.
"In China's case, edible oil imports grew by 23 per cent, while palm oil imports grew by 14 per cent in the first five months of 2013.
"Malaysia's total palm oil exports for the first six months of this year grew by seven per cent to 8.4 million tonnes," the research house added.