Malaysia: Lack of catalysts forecast for palm oil sector

Hong Leong Investment Bank Bhd Research (HLIB Research) has maintained its “neutral” call on the plantation sector as the absence of a notable demand catalysts has indicated that current high palm oil price will not be sustainable in the long term.

In a report, HLIB Research said palm oil’s narrower price discount against soy oil is due to impending seasonal output recovery and the lack of demand, among other factors.

The research firm noted the US Department of Agriculture’s National Agricultural Statistics Service’s prospective planting report revealed that US farmers plan to plant 90 million acres of corn and 86.5 million acres of soybean in the planting season.

The projected corn planted area came in slightly below the average trade estimates of 91.8 million acres, while the projected planted area for soybean came in within the average trade estimate.

HLIB Research’s top sector picks are IOI Corp Bhd with a “buy” rating and target price (TP) of RM4.66 a share and Hap Seng Plantations Holdings Bhd with a “buy” rating and a TP of RM2.06.

Tags: output, demand, plantation sector, corn, price, soybeans, palm oil