11/07/2024 12:55 PM

KUALA LUMPUR, July 11 (Bernama) -- RHB Investment Bank Bhd has maintained its crude palm oil (CPO) “price assumption” of around RM3,900 per tonne for 2024 and its “neutral” call on the plantation sector amid higher stockpiles of the commodity recorded in June.

The investment bank noted that the CPO inventory rose four per cent month on month to 1.83 million tonnes in June due to lower exports “but was offset by lower production.”

"We expect stock levels to gradually improve and approach the two million tonne mark in the coming months as we enter the peak production season.

"Main catalyst to look out - the La Nina season is still a possibility and is expected to develop in September to November 2024 and then persist through the first quarter of 2025 – with an 85 per cent probability," it said in a report.

Hong Leong Investment Bank (HLIB) reckons that the uptrend in palm oil stockpiles would likely continue into July 2024, on the back of a seasonal uptick in cropping patterns that will likely offset potential higher export demand arising from palm oil’s improved price competitiveness against soy oil, as well as the absence of festive-driven demand. "We maintain our neutral stance on the plantation sector, given the absence of a notable demand catalyst," it said.

Kenanga Investment Bank Bhd noted that CPO price should remain firm, averaging at RM3,800 per tonne “as supply increment trails demand growth.” It said although the plantation sector’s earnings can be volatile due to CPO prices, palm oil is essential in the global food and biofuel chains.

"We expect better upstream profits on firm CPO prices and easier cost but weak downstream profits to persist on competition arising from excess refining capacity in the region and subdued demand for oleochemicals in a soft global economy.

"The sector is also shariah-compliant but CPO prices are likely to stay flat hence there is no compelling upside catalyst for the next quarter or two," it added.




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