We see the light
Plantation stocks under our coverage have sharply increased by 16.1% on average from last trading day in 2008, factoring possible lower soybean oil production and CPO inventory level. We also view that current export data (up by 29.7% yoy in Jan09) are providing some support to CPO prices since it is not as bleak as previously estimated. However, as CPO production should take time to decline, inventory in producing countries might be still high in 1H09. We sense CPO prices to remain volatile in the near term, and we expect to see sustained recovery in prices in the 2H09. We therefore maintain our Overweight stance for the sector with CPO price assumptions at US$550-600/ton in FY09F-10F.
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