Palm oil stocks topped expectations in November, which may cap near-term upside for CPO price. Weaker exports and lower domestic usage were behind the higher stockpile. We continue to predict a drop in CPO price from 2Q12 onwards when La Nina concerns subside. 2012 promises to be a more challenging year due to lower selling prices, higher costs and a potential margin squeeze for downstream operations. Hence, our Underweight call, reinforced by rich valuations. We prefer Singapore planters. In Malaysia, Sime Darby is our top pick.
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