KLCI At 1328 & Buoyant CPO Prices

Posted by Kris | Sunday, March 14, 2010 | | 2 comments »

The Malaysian KLCI have the best run so far this year last week. It broke the 1,300 level sparked by oil palm plantation and banking stocks. The OPR hike triggered the run on banking stocks while positive feedbacks on CPO prices during the Palm and Lauric Oil Conference was a positive boost to plantation related companies.

The weather nowadays is freaking hot and abnormal. This is according to experts, is a repeat to the El Nino phenomenon that hit Malaysia a few years ago. Thus, plantation stocks rose because this weather effect disrupts the growth of palm oil trees. Furthermore, this year is supposedly the most productive cycle for the palm oil industry (Palm oil production is cyclic in nature, due to the tree's life cycle) but the adverse weather would reduce the production volume hence the expected price hike.

Experts told participants of the Palm and Lauric Oil Conference, held last week, that CPO prices were likely to trade between RM2,800 per and RM3,200 per tonne in the second-half of this year and first-half of 2011.

Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron also shared a similar view when he predicted crude palm oil prices will likely breach the RM3,000 per tonne level towards the second-half of this year due to production shortfalls.

For the week just-ended, CPO futures recorded a weak performance on lack of demand and profit taking amid weaker soyoil futures prices.

On a Friday-to-Friday basis, March rose RM53 to RM2,729, April added RM32 to RM2,709, May gained RM15 to RM2,685 and June perked RM6 to RM2,670.

The total weekly turnover declined to 63,055 lots, from 71,163 lots last week, while open interest rose to 82,037 contracts, from 81,079 contracts, previously.

On the physical palm oil market, April South slipped RM10 to RM2,670 per tonne. -- Bernama
If weather conditions worsened around the globe, other vegetable oil related crop commodities like soya bean, corn will also be affected. This will surely propel the CPO prices to highs we seen before the 2007-2008 financial crisis.

Thus, we have seen ultra positive expectation lately on future earnings on huge plantation companies like Kepong, IOICorp, etc as Malaysia is one of the biggest producer of palm oil in the world besides Indonesia.

Nevertheless, i see that the stock market is getting hot again as the brokerage houses are now on a roadshow spree again. Even some of my friends, who i never thought would open a CDS account started to get interested and opened an account. They were so much scared of the downside risk before that they disdain stock or mutual fund investments. Woot.. (I always thought mutual funds were safer and encouraged them to buy some previously before the rise but i got a very cold & scaredy response). People change very fast because of greed, which is all to familiar to me since i started to dabble in stocks,options for a 5 years now.

Nevertheless, this above is good indirect indication that the market will get hotter sooner , similar to the current Malaysian weather. But expect, small showers of rain from time to time to "cool down" the market.


  1. kampunginvestor // 7:23 AM  

    Wah brother, did you fatt choy or not? ^^

    Hope you are making money with this small bull run ya! ^^

    Together we fly or sink! wakaka

  2. Kris // 7:54 PM  

    Preferly flying and soaring :P