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Tuesday, August 13, 2013

Kenanga Research bullish on CPO prices


KUALA LUMPUR: Kenanga Research is positive on crude palm oil (CPO) prices in the second half of this year and has maintained its forecast of RM2,500 per metric tonne (mt) this year, following news on lower-than-expected US soyabean production.

US Department of Agriculture (USDA), in a recent report, has unexpectedly cut US soyabean production estimate by five per cent to 88.60 million mt, or three per cent below the consensus forecast of 91.36 million mt, mainly due to lower harvested area and yield estimates.

"By itself, the news on the lower-than-expected US soyabean output should be positive to CPO prices.

"The insufficient supply of soyabean will lead to low soyabean oil supply globally and this will increase demand for palm oil, which is commonly used as a substitute," Kenanga said in a research note today.

The five per cent cut by USDA has resulted in 1.5 per cent decrease to 281.72 million mt in the global soyabean production from July 13, 285.89 million MT estimation, it said.

Locally, palm oil export jumped 18.5 per cent in first 10 days of August and this should also be positive to CPO prices as well, Kenanga said.

On the converse, the latest data released by Intertek had shown a significant improvement in Malaysia palm oil exports.

"The better demand should be positive to CPO prices as the overall demand outlook has improved," it said.

The research house said despite its bullishness on CPO prices, the current share prices for big-capitalised planters were already reflecting valuation of CPO prices at RM2,700 mt for 2014.

"Hence, we reiterate our 'neutral' rating on the sector and at this juncture, there are no changes to our calendar year 2013-2014 average CPO price forecasts of RM2,500-RM2,700 per mt," Kenanga said. -- BERNAMA

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