Thursday, March 17, 2011

Credit Suisse maintains underperform on IOI, Sime on lower palm oil prices

KUALA LUMPUR: Credit Suisse Research said palm oil spot prices have fallen 14%, from 2011 peak of RM3,910 to RM3,375, and is trading at a four-month low.

It said on Wednesday, March 16 that it believes palm oil prices have peaked and will weaken especially in 2H11 for the following reasons: (1) La Nina is fading; (2) record-high net long speculative positions in soy and corn are vulnerable to profit taking; and (3) Palm oil supply could surprise on the upside in 2H11.

Year-to-date, palm oil spot prices have averaged RM3,708 per tonne. 'We have assumed a 2011 palm oil price average of RM2,950/tonne,' it said.

It said investors should watch out for the US Planting Intentions Report on March 31.

'Among our coverage, companies which are most vulnerable to a fall in palm oil prices are Genting PLANTATION []s, KLK, Sime and IndoFood Agri. We maintain our UNDERPERFORM ratings on IOI and Sime. Wilmar is the only stock with an OUTPERFORM rating in the palm oil space,' it said.

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