A worker arranges palm oil fruits at a factory in Sepang. Malaysia accounts for 33.1% of the world
KUALA LUMPUR: Maybank Investment Bank Research says crude palm oil (CPO) price is on a short term rebound for now but maintains its view that CPO price selling pressure in 2H17.
“The recent CPO price rebound in May is justified given the relatively tight stockpile scenario in Apr 2017. And healthy demand ahead of the Eid al-Fitr celebration should help cap CPO price on the downside in 2Q17,” the research house said.
It added that the relatively good upcoming 1Q17 results release could further lift sentiment.
“But we maintain our view that CPO price selling pressure could resurface in 2H17 as output peaks seasonally as the good rainfall enjoyed over the past 6-9 months in the region will encourage good crop formation in 2H17,” Maybank said.
The research house has maintained a “neutral’ call on the plantations sector.
It said the key risks to its 2017 RM2,400 per tonne CPO average selling price forecast would be weather anomalies, further weakness in ringgit against the US dollar and the anticipated strong yield recovery not materialising.
Based on preliminary export estimates for the first 10 days of May by Intertek and SGS (independent cargo surveyors), Malaysia’s exports grew 13%/15% month-on-month to 346,920/359,355 tonne.
“We believe the healthy exports will last till mid-June as Muslims around the world celebrate Eid al-Fitr at the end of June 2017. These import demands will help sustain CPO price in 2Q17 at around RM2,600-RM2,800 per tonne levels,” Maybank said.
“However, if import demands are not sustained thereafter, CPO price will come under another round of selling pressure in 2H17 when output peaks seasonally.
“And, if weather permits and US soybean planting progress is uninterrupted as planned, it will pile on pressure on CPO price in 3Q17,” it added.
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