KUALA LUMPUR, July 11 (Xinhua) -- Analysts on Friday maintained their neutral views on Malaysia's plantation sector after the country's palm oil stockpile reached an 18-month high of 2.03 million tons in June.
Malaysian Palm Oil Board (MPOB) data showed Thursday that Malaysia's June palm oil stockpile increased 2 percent month-on-month and 11 percent year-on-year to 2.03 million tons. The increase came despite lower production levels, as exports fell at a relatively steeper rate.
For the second quarter, Malaysia's palm oil output rose 7 percent year-on-year and 35 percent quarter-on-quarter to 5.15 million tons, following a dismal first quarter output of just 3.82 million tons, due to unfavorable wet weather.
Maybank Investment Bank said in a note on Friday that it believes Malaysia's palm oil output will resume its upward trend in July, and output may peak in September or October this year.
"Strong seasonal output recovery in the near term will likely cap the upside to crude palm oil (CPO) price, thus stimulating demand in the immediate term," said the research house.
Meanwhile, MIDF Research said in a note that the expected increase in production may lead to higher closing stock levels in Malaysia, which could reduce CPO price competitiveness.
"Looking ahead, with the end of the inter-monsoon and pollination periods, drier weather and a faster recovery in fresh fruit bunches evacuation activities expected from July onwards, this allows estate productivity to gain momentum -- particularly in terms of harvesting and manuring activities," it said.
Hong Leong Investment Bank Research also highlighted that palm oil stock level will likely remain at above 2 million tons mark in July, as potentially stronger demand from India will likely be offset by an anticipated seasonal increase in crop yield and the absence of festive-driven demand.
The research house believes CPO prices will remain subdued in the third quarter, before turning more upbeat in the fourth quarter. (1 ringgit equals 0.23 U.S. dollar) ■