CLSA INDO: Malaysian palm oil inventory drawdown continues

This is bullish for CPO and plantation stocks.

Comment from our analyst Wilianto:

Our top picks: KL Kepong, Sime Darby, Golden Agri, London Sumatra.


Stock fall more than expected to 1.79m tons (-10.9% mom, +14% yoy), below market expectation of 1.9m tons inventory.

Key factor is the decline in production that declined 12.4% mom to 1.16m tons and is already 41.7% below the peak production in Oct09. The decline is steeper than normal and anecdotal evidences continue to shows that production will remain low in Mar10.

Demand in the mean time remains strong/stable. Although it dipped 11.6% mom post CNY, the trend remains encouraging and no sign of weakness (see chart below).

We reiterate our positive view on the sector.