The sharp pullback in palm oil represents a cyclical downtrend

Tag : Edible Fats & Oils

OSK Research, which has a neutral call on the plantation sectormaintained its trading buy calls on most of the plantationcompanies under its coverage.
We advise investors with longer term horizons (exceeding 12months) to accumulate plantation stocks on the current priceweakness, it said in a report.
OSK said it was not overly concerned about a post-Olympics economicslowdown in China as edible oil consumption per capita shouldcontinue to grow with the increase in wealth.
The research house was more concerned over the global economy,particularly that of developed countries, which probably still hadroom to slow down further.
The sharp pullback in palm oil as well as plantation stock pricesrepresents a cyclical downtrend within a very much intact secularbull trend, which we believe will reassert itself sometime in thefirst half of 2009, OSK said.
Going forward, analysts said IOI Corp should continue to performwell, despite a possibility of CPO prices falling further in thecoming months.
Plantation analysts said CPO prices were currently hovering aroundthe RM2,000 per tonne level and could go either way for sometime.
As long as the world needs cooking oil, soap and other fats andfuels that can be extracted from palm trees, lower prices willincrease demand, an analyst said.
An analyst said IOI Corp was expanding its downstream productionfacilities, which would transform Pasir Gudang in Johor into amajor palm oil processing centre.
He said the expansion was timely considering the weakening CPOprice.
It would pave the way for IOI Corp to further develop itsdownstream operations in line with its plans to diversify into thespeciality oils and fats business.
IOI Corp is the only Malaysian company that has made it to thelatest Forbes Asia Fabulous 50 List.
Forbes said although palm oil prices fell and IOIs shares droppedearly this year, the company was listed for the third straight yearbecause it was one of the most efficient palm oil producers, withyield per hectare of about 50% higher than its rivals in Malaysiaand Indonesia.

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