Published: Wednesday November 14, 2012 MYT 9:01:00 AM
RHB Research sees limited downside risk for CPO prices
KUALA LUMPUR: RHB Research Institute said Malaysia's CPO production fell 3.3% mom in October, which could mean that production would start gradually falling from hereon until 1Q2013. Exports rose by a larger 16.2% on-month.
It said on Wednesday that going forward, it expects stock levels to start reducing from November onwards, as production starts to fall post-peak period and as demand improves on the back of festive demand for the Christmas and Chinese New Year period.
“We therefore believe that downside risk for CPO prices from hereon would be limited and expect CPO prices to start creeping up slowly soon, all the way until sometime in 1H2013,” it said.
RHB Research said it revising down its average CPO price assumptions for 2012 to RM2,900 a tonne from RM3,100.
“For 2013, we maintain our view that average price would be lower than 2012, on the back of the positive fundamental factors, and reduce our CPO price assumption to RM2,800 a tonne from RM2,900/tonne,” it said.
RHB Research changed its recommendations on Genting Plantations to Underperform from Market Perform and KL Kepong to Market Perform from Underperform.
“We continue to prefer the integrated and more diversified players, given the relatively smaller impact of CPO price movements and the impending export tax structure change on earnings. No change to our Neutral sector call,” it said.