Wednesday, October 27, 2010

Credit Suisse sees year-end CPO seasonal rally, possibly early 2011

KUALA LUMPUR: Credit Suisse Research sees a year-end seasonal rally, possibly until early 2011 for crude palm oil (CPO) prices.

It said in a research note issued on Tuesday, Oct 26 that palm oil spot prices have breached the RM3,000 level, and is now at a 27-month high.

Year-to-date (YTD), palm oil spot prices have averaged RM2,599 a tonne, up 18% YTD. Meanwhile, palm oil prices in the US dollar have risen 28% YTD, as the US dollar has weakened 11% against the ringgit.

Over the past 10 years, palm oil prices have troughed in July-September and peaked in December-March, more than three quarters of the time.

???We believe the current palm oil price rally could be partly seasonal. If the trend is similar to that of previous years, the palm oil price rally may last until March 2011, but could weaken thereafter,??? it said.

Credit Suisse said it sticks to its view spelt out in its August 2010 report, ???The rise before the fall???.

???We believe palm oil prices will seasonally increase over the next few months, but remain bearish in 2011,??? it said.

The research house said for investors looking to take advantage of the seasonal rally, it highlighted high-beta stocks: Indofood Agri Resources Ltd (IFAR beta of 1.7);?? PT London Sumatra Indonesia (LSPI beta of 1.3) and IOI Corporation (beta of 1.3).

PLANTATION [] companies with the highest leverage to rising palm oil prices are PT Astra Agro Lestari Tbk , Sampoerna Agro Tbk, IFAR, Genting Plantations Bhd and Kuala Lumpur Kepong.

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