MARKET DEVELOPMENT
Palm Oil’s Near Term Prospects Fade
Palm Oil’s Near Term Prospects Fade
03/08/2016 (The Star) - Investors are less bullish on the plantations sector in the near term as crude palm oil (CPO) price has so far failed to meet the forecast of RM3,000 per tonne according to CIMB Research.
“We found that investors are generally still keen on the sector in the long term but are less bullish on the sector in the near term compared to the beginning of the year.
“This led us to conclude that investors are neutral on the sector.
“The reason is that CPO prices have failed to meet the forecasts to reach RM3,000 per tonne, despite the weaker-than-expected palm oil supplies.
“On top of this, CPO prices have fallen from the peak of RM2,714 per tonne in Apr to RM2,342 per tonne currently,” said CIMB Research in a sector report yesterday.
CIMB Research explained that that poor Chinese demand for palm oil led to weaker prices.
This is evidenced from the 50% year-on-year (yoy) drop in China demand for Malaysian palm oil in the first half of this year, as Chinese government released two million tonnes of rapeseed oil from state reserves.
“The good news is that the Chinese government has stop releasing rapeseed oil from state reserves in recent months but this is offset by concern that the government still holds around four million tonnes of rape oils in its reserves,” it said.
Apart from that, CIMB said the other key drivers for CPO prices are El Nino and La Nina impact on palm oil supplies for next year.
“Indonesia and Malaysia progress in implementing biodiesel mandate and the prospects for US soybean crops in second half of this year,” it said.
CIMB Research maintained its 2016 and 2017 average CPO price view of RM2,450 and RM2,600 per tonne.
Among CIMB Research stock picks,it highlighted to investors that Felda Global Ventures has a lot of potential to unlock and its share price is attractive, as it trades below book value.
“We found that investors are generally still keen on the sector in the long term but are less bullish on the sector in the near term compared to the beginning of the year.
“This led us to conclude that investors are neutral on the sector.
“The reason is that CPO prices have failed to meet the forecasts to reach RM3,000 per tonne, despite the weaker-than-expected palm oil supplies.
“On top of this, CPO prices have fallen from the peak of RM2,714 per tonne in Apr to RM2,342 per tonne currently,” said CIMB Research in a sector report yesterday.
CIMB Research explained that that poor Chinese demand for palm oil led to weaker prices.
This is evidenced from the 50% year-on-year (yoy) drop in China demand for Malaysian palm oil in the first half of this year, as Chinese government released two million tonnes of rapeseed oil from state reserves.
“The good news is that the Chinese government has stop releasing rapeseed oil from state reserves in recent months but this is offset by concern that the government still holds around four million tonnes of rape oils in its reserves,” it said.
Apart from that, CIMB said the other key drivers for CPO prices are El Nino and La Nina impact on palm oil supplies for next year.
“Indonesia and Malaysia progress in implementing biodiesel mandate and the prospects for US soybean crops in second half of this year,” it said.
CIMB Research maintained its 2016 and 2017 average CPO price view of RM2,450 and RM2,600 per tonne.
Among CIMB Research stock picks,it highlighted to investors that Felda Global Ventures has a lot of potential to unlock and its share price is attractive, as it trades below book value.