KUALA LUMPUR: JF Apex Research expects EA Holdings Bhd (EAH), CBIP, Berjaya Sports Toto and Borneo Oil to see some trading activity on Tuesday.
It said EAH had proposed a renounceable rights issue exercise while CBIP’s unit won a RM46mil contract in Papua New Guinea to build a palm oil mill.
JF Apex Research also said Berjaya Toto’s latest quarterly net profit fell 15% on-year while Borneo Oil was appointed as contractor to prospect and mine alluvial and lode gold in Lipis, Pahang.
Overnight on Wall Street, US stocks rallied, with the Dow industrials rebounding after a five-day losing streak, as voting in Crimea passed without violence.
It added economic reports also showed US manufacturing output jumped the most in six months in February.
Similarly, European stocks closed higher, recovering from last week's slump as investors responded to positive US data and shrugged off the referendum result in Crimea at the weekend.
On Monday, the FBM KLCI surged 10.04 points to close at 1,815.16.
“Following the rebound in the US, we expect the KLCI to be positive today with an eye on its resistance of 1,825,” it added.
It said EAH had proposed a renounceable rights issue exercise while CBIP’s unit won a RM46mil contract in Papua New Guinea to build a palm oil mill.
JF Apex Research also said Berjaya Toto’s latest quarterly net profit fell 15% on-year while Borneo Oil was appointed as contractor to prospect and mine alluvial and lode gold in Lipis, Pahang.
Overnight on Wall Street, US stocks rallied, with the Dow industrials rebounding after a five-day losing streak, as voting in Crimea passed without violence.
It added economic reports also showed US manufacturing output jumped the most in six months in February.
Similarly, European stocks closed higher, recovering from last week's slump as investors responded to positive US data and shrugged off the referendum result in Crimea at the weekend.
On Monday, the FBM KLCI surged 10.04 points to close at 1,815.16.
“Following the rebound in the US, we expect the KLCI to be positive today with an eye on its resistance of 1,825,” it added.
El Nino and Threat of Soy Oil Bears on Palm Oil Prices
Malaysian palm oil prices are set to take a dive with the pressure of soy oil and reduced demand from China — AFP pic
LAUNCESTON,
March 17 — Benchmark Malaysian palm oil futures have retreated from
18-month highs, and while prices may struggle in the next few months,
the longer-term prognosis is tilted toward further gains.
Palm
oil is currently caught in a classic tug-of-war between bullish and
bearish factors, but the negative influences are likely to be more short
term than the positive drivers.
The
bearish side is being led by concern over demand from the world's top
two importers, China and India, ample supply of competing oils such as
soy oil and the narrowing of palm oil's price advantage over other
edible oils.
The bullish side can point
to falling inventories in major exporter Malaysia, rising domestic
demand in top producer Indonesia and the threat of lower supply as the
likelihood of an El Nino weather event increases this year.
El
Nino is shaping up as the biggest risk for palm oil output this year,
with meteorologists saying there is an increased chance of the weather
pattern striking this year.
El Nino - the Spanish
word for boy - is a warming of sea-surface temperatures in the Pacific
that occurs every four to 12 years, causing dry conditions
in Australia, Southeast Asia and parts of Africa and wetter weather
in North America.
A strong El Nino would cut palm
oil output in Malaysia and Indonesia by as much as 30 percent, although
forecasters haven't as yet warned of a severe event.
Nonetheless, the likelihood is that output will be lower this year in Southeast Asia.
El
Nino also tends to make India's monsoon rains erratic, which may affect
the country's domestic oilseed output given that 55 percent of
agricultural land isn't irrigated and is dependent on rains.
This
could boost Indian imports of palm oil, which sank to an almost
three-year low in February, dropping 27 percent from January to just
403,685 tonnes.
India's oilseed imports have been muted on expectations of a bumper harvest of the main rapeseed crop this month.
However,
if this winter's rapeseed crop is affected by El Nino, it could result
in a boost to imports in the second half of 2014, just as palm oil
output may be slowing inMalaysia and Indonesia.
China's
imports of palm oil rose in January to 556,523 tonnes, a gain of 17.7
percent over the same month a year earlier. This was also higher than
the monthly average in 2013 of 498,256 tonnes.
The
concern in China is that slower economic growth will hurt demand, but
this is based on the assumption that February's weaker-than-expected
exports, industrial production and retail sales numbers are the start of
a sustained trend.
Assuming that one month's weak
data in China will result in a string of poor numbers is risky, as the
authorities have shown they will turn on the stimulus taps if they feel
the growth outlook is slipping too much.
PRICE SPREAD NARROWS, BUT BIODIESEL MANDATE TO SUPPORT
What may be of more concern for demand is the shrinking price advantage of palm oil over soy oil.
Converting
Malaysian-traded palm oil and Chicago soy oil futures to dollars per
tonne shows the discount for palm oil was US$83.40 (RM273.35) a tonne on
March 14, down from US$309 (RM1,012) at the start of 2013.
However,
the narrowing of the gap is more of a return to historical trading
norms, with the premium for soy oil having been anchored around US$100 a
tonne for the last five years.
The exception was
of a period of widening from mid-2012 to the first quarter of 2013,
which coincided with ample palm oil supplies and inventories
in Malaysia andIndonesia.
But palm oil prices may
draw support in the second half of this year from Indonesia's biodiesel
mandate, which was raised in August 2013 to a minimum 10 percent bio
fuel in diesel from the previous 3-10 percent range.
However,
the Indonesian Palm Oil Association believes it will be difficult for
the mandate to be met, given the price increase in palm oil so far this
year.
Indonesia is expected to use 2 million
tonnes of palm oil for blending instead of an initial target of 3.4
million tonnes, association executive director Fadhil Hassan said March
5.
Even so, with the production outlook uncertain
because of El Nino fears, any increase in domestic palm oil demand will
lower the amount available for export.
Benchmark
Malaysian palm oil futures have gained around 4 percent so far this
year, and are currently trading at RM2,763 a tonne, off an 18-month peak
of RM2,916 reached on March 11.
Overall, the
outlook is for downward pressure on prices in the short term given the
question marks over Indian and Chinese demand and the narrowing of
palm's price advantage to soy oil.
But this dynamic could reverse in the second half of the year, especially if an El Nino event does materialise.
The
shape of the Malaysian futures curve is currently a mild backwardation,
with the June contract at RM2,763 a tonne on March 17, and the
September contract at RM2,693, a discount of 2.5 percent.
This
suggests that the market is expecting some price weakness in the next
few months, but isn't yet expecting a supply squeeze later in the year.
In short, the market isn't yet priced for an El Nino event.
The
last El Nino in 2009 and 2010 resulted in lower palm oil production
in Malaysia, even as the area under cultivation increased. — Reuters
Source : The Malay MailEl Nino and Threat of Soy Oil Bears on Palm Oil Prices
Malaysian palm oil prices are set to take a dive with the pressure of soy oil and reduced demand from China — AFP pic
LAUNCESTON,
March 17 — Benchmark Malaysian palm oil futures have retreated from
18-month highs, and while prices may struggle in the next few months,
the longer-term prognosis is tilted toward further gains.
Palm
oil is currently caught in a classic tug-of-war between bullish and
bearish factors, but the negative influences are likely to be more short
term than the positive drivers.
The
bearish side is being led by concern over demand from the world's top
two importers, China and India, ample supply of competing oils such as
soy oil and the narrowing of palm oil's price advantage over other
edible oils.
The bullish side can point
to falling inventories in major exporter Malaysia, rising domestic
demand in top producer Indonesia and the threat of lower supply as the
likelihood of an El Nino weather event increases this year.
El
Nino is shaping up as the biggest risk for palm oil output this year,
with meteorologists saying there is an increased chance of the weather
pattern striking this year.
El Nino - the Spanish
word for boy - is a warming of sea-surface temperatures in the Pacific
that occurs every four to 12 years, causing dry conditions
in Australia, Southeast Asia and parts of Africa and wetter weather
in North America.
A strong El Nino would cut palm
oil output in Malaysia and Indonesia by as much as 30 percent, although
forecasters haven't as yet warned of a severe event.
Nonetheless, the likelihood is that output will be lower this year in Southeast Asia.
El
Nino also tends to make India's monsoon rains erratic, which may affect
the country's domestic oilseed output given that 55 percent of
agricultural land isn't irrigated and is dependent on rains.
This
could boost Indian imports of palm oil, which sank to an almost
three-year low in February, dropping 27 percent from January to just
403,685 tonnes.
India's oilseed imports have been muted on expectations of a bumper harvest of the main rapeseed crop this month.
However,
if this winter's rapeseed crop is affected by El Nino, it could result
in a boost to imports in the second half of 2014, just as palm oil
output may be slowing inMalaysia and Indonesia.
China's
imports of palm oil rose in January to 556,523 tonnes, a gain of 17.7
percent over the same month a year earlier. This was also higher than
the monthly average in 2013 of 498,256 tonnes.
The
concern in China is that slower economic growth will hurt demand, but
this is based on the assumption that February's weaker-than-expected
exports, industrial production and retail sales numbers are the start of
a sustained trend.
Assuming that one month's weak
data in China will result in a string of poor numbers is risky, as the
authorities have shown they will turn on the stimulus taps if they feel
the growth outlook is slipping too much.
PRICE SPREAD NARROWS, BUT BIODIESEL MANDATE TO SUPPORT
What may be of more concern for demand is the shrinking price advantage of palm oil over soy oil.
Converting
Malaysian-traded palm oil and Chicago soy oil futures to dollars per
tonne shows the discount for palm oil was US$83.40 (RM273.35) a tonne on
March 14, down from US$309 (RM1,012) at the start of 2013.
However,
the narrowing of the gap is more of a return to historical trading
norms, with the premium for soy oil having been anchored around US$100 a
tonne for the last five years.
The exception was
of a period of widening from mid-2012 to the first quarter of 2013,
which coincided with ample palm oil supplies and inventories
in Malaysia andIndonesia.
But palm oil prices may
draw support in the second half of this year from Indonesia's biodiesel
mandate, which was raised in August 2013 to a minimum 10 percent bio
fuel in diesel from the previous 3-10 percent range.
However,
the Indonesian Palm Oil Association believes it will be difficult for
the mandate to be met, given the price increase in palm oil so far this
year.
Indonesia is expected to use 2 million
tonnes of palm oil for blending instead of an initial target of 3.4
million tonnes, association executive director Fadhil Hassan said March
5.
Even so, with the production outlook uncertain
because of El Nino fears, any increase in domestic palm oil demand will
lower the amount available for export.
Benchmark
Malaysian palm oil futures have gained around 4 percent so far this
year, and are currently trading at RM2,763 a tonne, off an 18-month peak
of RM2,916 reached on March 11.
Overall, the
outlook is for downward pressure on prices in the short term given the
question marks over Indian and Chinese demand and the narrowing of
palm's price advantage to soy oil.
But this dynamic could reverse in the second half of the year, especially if an El Nino event does materialise.
The
shape of the Malaysian futures curve is currently a mild backwardation,
with the June contract at RM2,763 a tonne on March 17, and the
September contract at RM2,693, a discount of 2.5 percent.
This
suggests that the market is expecting some price weakness in the next
few months, but isn't yet expecting a supply squeeze later in the year.
In short, the market isn't yet priced for an El Nino event.
The
last El Nino in 2009 and 2010 resulted in lower palm oil production
in Malaysia, even as the area under cultivation increased. — Reuters
Source : The Malay MailEl Nino and Threat of Soy Oil Bears on Palm Oil Prices
Malaysian palm oil prices are set to take a dive with the pressure of soy oil and reduced demand from China — AFP pic
LAUNCESTON,
March 17 — Benchmark Malaysian palm oil futures have retreated from
18-month highs, and while prices may struggle in the next few months,
the longer-term prognosis is tilted toward further gains.
Palm
oil is currently caught in a classic tug-of-war between bullish and
bearish factors, but the negative influences are likely to be more short
term than the positive drivers.
The
bearish side is being led by concern over demand from the world's top
two importers, China and India, ample supply of competing oils such as
soy oil and the narrowing of palm oil's price advantage over other
edible oils.
The bullish side can point
to falling inventories in major exporter Malaysia, rising domestic
demand in top producer Indonesia and the threat of lower supply as the
likelihood of an El Nino weather event increases this year.
El
Nino is shaping up as the biggest risk for palm oil output this year,
with meteorologists saying there is an increased chance of the weather
pattern striking this year.
El Nino - the Spanish
word for boy - is a warming of sea-surface temperatures in the Pacific
that occurs every four to 12 years, causing dry conditions
in Australia, Southeast Asia and parts of Africa and wetter weather
in North America.
A strong El Nino would cut palm
oil output in Malaysia and Indonesia by as much as 30 percent, although
forecasters haven't as yet warned of a severe event.
Nonetheless, the likelihood is that output will be lower this year in Southeast Asia.
El
Nino also tends to make India's monsoon rains erratic, which may affect
the country's domestic oilseed output given that 55 percent of
agricultural land isn't irrigated and is dependent on rains.
This
could boost Indian imports of palm oil, which sank to an almost
three-year low in February, dropping 27 percent from January to just
403,685 tonnes.
India's oilseed imports have been muted on expectations of a bumper harvest of the main rapeseed crop this month.
However,
if this winter's rapeseed crop is affected by El Nino, it could result
in a boost to imports in the second half of 2014, just as palm oil
output may be slowing inMalaysia and Indonesia.
China's
imports of palm oil rose in January to 556,523 tonnes, a gain of 17.7
percent over the same month a year earlier. This was also higher than
the monthly average in 2013 of 498,256 tonnes.
The
concern in China is that slower economic growth will hurt demand, but
this is based on the assumption that February's weaker-than-expected
exports, industrial production and retail sales numbers are the start of
a sustained trend.
Assuming that one month's weak
data in China will result in a string of poor numbers is risky, as the
authorities have shown they will turn on the stimulus taps if they feel
the growth outlook is slipping too much.
PRICE SPREAD NARROWS, BUT BIODIESEL MANDATE TO SUPPORT
What may be of more concern for demand is the shrinking price advantage of palm oil over soy oil.
Converting
Malaysian-traded palm oil and Chicago soy oil futures to dollars per
tonne shows the discount for palm oil was US$83.40 (RM273.35) a tonne on
March 14, down from US$309 (RM1,012) at the start of 2013.
However,
the narrowing of the gap is more of a return to historical trading
norms, with the premium for soy oil having been anchored around US$100 a
tonne for the last five years.
The exception was
of a period of widening from mid-2012 to the first quarter of 2013,
which coincided with ample palm oil supplies and inventories
in Malaysia andIndonesia.
But palm oil prices may
draw support in the second half of this year from Indonesia's biodiesel
mandate, which was raised in August 2013 to a minimum 10 percent bio
fuel in diesel from the previous 3-10 percent range.
However,
the Indonesian Palm Oil Association believes it will be difficult for
the mandate to be met, given the price increase in palm oil so far this
year.
Indonesia is expected to use 2 million
tonnes of palm oil for blending instead of an initial target of 3.4
million tonnes, association executive director Fadhil Hassan said March
5.
Even so, with the production outlook uncertain
because of El Nino fears, any increase in domestic palm oil demand will
lower the amount available for export.
Benchmark
Malaysian palm oil futures have gained around 4 percent so far this
year, and are currently trading at RM2,763 a tonne, off an 18-month peak
of RM2,916 reached on March 11.
Overall, the
outlook is for downward pressure on prices in the short term given the
question marks over Indian and Chinese demand and the narrowing of
palm's price advantage to soy oil.
But this dynamic could reverse in the second half of the year, especially if an El Nino event does materialise.
The
shape of the Malaysian futures curve is currently a mild backwardation,
with the June contract at RM2,763 a tonne on March 17, and the
September contract at RM2,693, a discount of 2.5 percent.
This
suggests that the market is expecting some price weakness in the next
few months, but isn't yet expecting a supply squeeze later in the year.
In short, the market isn't yet priced for an El Nino event.
The
last El Nino in 2009 and 2010 resulted in lower palm oil production
in Malaysia, even as the area under cultivation increased. — Reuters
Source : The Malay Mail
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