We believe there is still a chance for a sector rally if September’s market volatility is not repeated this month. Although palm oil price has fallen below the RM3,000 level, the commodity’s wide price discount vis-à-vis soybean oil will help to limit the downside. The surge in inventory to above 2.0m tonnes is likely to be temporary and start to go down as we move into the seasonal downcycle in production. Maintain Neutral on the sector as its near-term strength will be followed by weaker prices in 2012.
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