KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has maintained its “neutral” call on the plantation sector, given the absence of a notable demand catalyst.
In a research note, the bank said the crude palm oil (CPO) price is forecasted between RM3,800 and RM4,000 per tonne for 2024-2025 due to the expectation of El Nino’s impact on palm oil production and prices to kick in around mid-2024.
It said Malaysia’s palm oil stockpile is likely to remain above two million tonnes in January 2024 as seasonally low production will be offset by weak near-term demand prospects.
“This arises from CPO’s unattractive price discount against soybean oil; less favourable palm oil spread to gas oil (POGO); and high stock levels among key vegetable importing countries, in particular China and India,” it said.
Similarly, RHB Investment Bank Bhd (RHB IB) maintained its “neutral” call on the plantation sector with a tactically positive trading strategy, as it expects a higher CPO price environment in the first half of 2024 (1H 2024).
“We expect CPO prices to range higher from current levels to above RM4,000 per tonne in 1H 2024, in anticipation of the El Nino impact on productivity in 2H 2024.
“While we expect CPO prices to pick up in 1H 2024 on seasonally low output and the impact of El Nino, demand remains lacklustre – so prices should be range-bound at RM3,500-RM4,500 per tonne for the year,” it added.
RHB IB expects stock levels to continue decreasing in the months ahead because of a lower output season and higher demand related to festive seasons.
Meanwhile, Maybank Investment Bank Bhd has maintained its CPO average selling price forecasts of RM3,700 per tonne for 2024, which is below 2023’s RM3,810 per tonne, premised on good South American soybean harvest, and anticipated lower year-on-year unit cost.
“In terms of price trend, CPO price is expected to be off to a good start in the first quarter of 2024 owing to the seasonally low output cycle, and should trend lower by mid-2024 in anticipation of seasonally better output in 2H 2024,” it said. – BERNAMA
