Affin Hwang maintains ‘neutral’ call on plantation sector

KUALA LUMPUR: Affin Hwang Capital Research has maintained its “neutral” rating on the plantation sector following a decline in palm oil inventory to its lowest in 11 months as production slowed.

The latest release of June data by the Malaysian Palm Oil Board showed palm oil stockpiles slipped 1% to 2.42 million tonnes for a fourth straight month of declining inventory.

For the month under review, local crude palm oil (CPO) production fell 9.2% month-on-month (m-o-m) to 1.52 million tonnes, partly owing to the Hari Raya festivities as estate workers returned to their hometowns.

The decline in inventory was also partly due to an increase in palm oil products consumption, the research house said.

Meanwhile, palm oil exports fell fell 19.4% m-o-m in June to 1.38 million tonnes due to weaker demand from the top three buyers, India, China and the European Union.

“The lower palm oil exports in June19 could partly be due to their earlier stocking-up activities done prior to the Hari Raya celebration, in our view,” said Affin Hwang.

Moving forward, the research house expects production to pick up again.

“We expect Malaysia’s 2019 CPO production to rebound to around 20 million tonnes from 19.5 million tonnes in 2018,” it said.

The research unit also said “we still expect global palm-oil inventories to gradually decline with higher exports and higher consumption of palm-oil products going forward, supported by the energy market and food industries”.

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