Inventory increased 9.3% mom to 2.45m tonnes

• CPO production rose 1.1% mom to 1.84m tonnes

• Palm oil exports dropped 18.8% mom to 1.41m tonnes.

• Average CPO price for 2019 of RM2,050/MT maintained.

• Maintain Underweight on the sector

October closing stocks rose to 2.45m tonnes

Malaysia’s September 2019 inventory climbed 9.27% mom to 2.448m tonnes. The higher inventory figure reflects the higher production and higher PO import of 71.1k tonnes compared to 51.1k tonnes in August 2018. Stocks of CPO and PPO (processed PO) increased 4.8% and 15.3% mom to 1.35m tonnes and 1.10m tonnes respectively during the period. We expect stock level to remain higher in the coming months as production increases and demand moderates.

Export dropped 18.77% mom to 1.41m tonnes

Palm oil export volume dropped 18.8% mom to 1.409m tonnes in Sep 2019 as major importing countries like India, China, EU and USA lowered their intake of PO. India registered the biggest drop of 43.6% followed by USA (-38.4%), China (-25.0%) and EU by -5.2%. We believe PO export will continue to be muted in the next couple of months given 1) absence of festivities, 2) slower demand from India, and 3) ample supply and high stock level of PO from Malaysia and Indonesia.

Source: BIMB Securities Research - 11 Oct 2019