A Cup of Tea 26 July'10

Our market will have consolidation with range 2997-3070 level. Inflow still healthy and will support the market. I think we must be more carefully, the gain probably not to be sustainable. Some shares still have positive momentum and my top pick was TLKM, INCO, TINS, PTBA, ASII and BMRI. But I also to accumulated buy on weakness for property and CPO related. I continue to positive view on base metal, energy/coal and cpo Sector.

TIN
TIN surged nearly 9.5 % on the week as traders warned of higher consumption than supply. On the London Metal Exchange, tin for delivery in three months rose on Friday to an intraday peak of $19,750 a tonne, the highest in nearly two years. Tin continues to provide one of the most robust fundamental pictures across the base metals complex, in 2010 and in 2011” due to a “clear global market deficit.

The shortage is due to falling production in Indonesia and robust consumption in Japan and, to a lesser extent, in Europe as manufacturing and electronic sectors increase output after the crisis.

My Comment
With falling production in Indonesia and better ISM data, I believe tin prices will rise above the key $20,000 a tonne level as soon as next week, and would surge to its record high of more than $25,000 in 2011.

NICKEL
Much like the rest of the base metals, nickel prices have been pressured by eurozone debt concerns and the slowdown in Chinese lending.

Nickel prices suffered the worst six weeks to mid-June of all base metals. The three-month LME contract down 22% from the start of May, However prices are still up 9% from the start of the year.

London Metal Exchange (LME) nickel inventory levels are down 20% from their peak in February.

The latest International Stainless Steel Forum (ISSF) production data suggests that the nickel market will remain in deficit for 2010 and 2011.

Barclays Capital is forecasting nickel spot price increases of 30% over the next 24 months - this is supported both by China's furious pace of industrialization and weakness on the supply side due to labour disputes.

Rio Tinto is alert to the impending supply/demand imbalance.

Russian export data predicts a 55,000 tonne nickel deficit in the Russian market for 2010. Demand is growing in step with domestic stainless steel output.

My Comment
Nickel is a critical ingredient in the production of stainless steel and industrial alloys - the demand for nickel rises directly in step with the growth of emerging economies. With better economic and ISM data I believe that the nickel price will higher gradually. Short-term relief comes from the continued disruptions at Vale’s Sudbury operations and the delay at Goro.

CPO
Crude palm oil ended higher Last week on fresh buying interest as investors tracked gains in soyoil and crude oil during Asian trade. CPO output for the first 20 days of July probably grew only 1.5% from the same period last month, in contrast to a previous forecast of 5%-10% for overall July production, indicating a possible drawdown in palm inventory levels even as export demand rises ahead of the festive season beginning next month.

With La Nina weather now underway, recent heavy rain in several oil-palm growing regions is already hurting output growth, although it is likely to boost yields in the future. Analysts at the investment bank forecast cash CPO prices to gain 15%-20% this year as biological yield stress caused by dry weather earlier this year hurt production.

Crop data from the Malaysian Palm Oil Board earlier in the week showed weaker-than-expected output growth in June, while robust festive demand ahead of the Islamic fasting period starting next month is also supporting prices. A 35% drop in palm oil inventory levels from its peak in December is "positive for CPO prices. Biodiesel demand may pick up in the second half this year and boost the prices of key feedstock including soyoil, supporting CPO as well.

Demand in the physical market has been good and this lent support. Pakistan, a major buyer of Malaysian palm oil, has likely purchased as much as 200,000 to 225,000 tons this month and may buy around 150,000 tons next month, Pakistan Edible Oil Refiners Association Vice Chairman Rasheed Janmohammad said recently.
GAPKI reveal, the export volume of crude palm oil (CPO) and its derivatives in June 2010 reached 1.135 million tons, an increase of 96 thousand tons from 1.039 million tons the previous month.

My Comment
Technical indicators has improved and showed that the market is very bullish. Prices are likely to move higher next week and may try to rise to MYR2,550/ton. Demand in the physical market has been good.

Consensus TP
Bang Juntri
DISCLAIMER: This report is issued by Bang Juntri. Although the contents of this document may represent the personal opinion of Bang Juntri. We cannot guarantee its accuracy and completeness.