KUALA LUMPUR (Dec 3): CIMB Research has maintained its “Neutral” rating on the plantation sector and said that overall, it expects Malaysian palm oil inventory to rise by 7% month-on-month (m-o-m) to 2.3 million tonnes in November.

In a note Dec, CIMB Research analsyst Ivy Ng said the higher inventory and recent decline in crude oil price to US$72 per barrel are near-term negatives for crude palm oil prices.

She said a survey conducted by CIMB Research’s futures team revealed that Malaysian palm oil output fell in November, slipping an estimated 5% m-o-m to 1.8 million tonnes, due to seasonally low production and the drought in 1Q14.

“Palm oil exports were weak, falling by around 10% mom as stronger demand from China was unable to offset weaker demand from India, Pakistan and Europe,” she said.

However, Ng said the near term negatives were offset by the potential onset of El Nino, which may reduce output.

“We maintain our Neutral sector call and prefer planters like First Resources, AALI and SIMP,” she said.