• Review: After rebounding from 52-week low of RM2186 (12 July) to a high of RM2737 (26 Sep), FCPO retreated 16% to 2538 (6 Oct) before closing at RM2560 on 7 Oct, ahead of the widely focused Sep MPOB report and SGS export data (1st ten days of Oct) today. The decline (refer FIG2/3/4) was mainly attributed to expectation of a 16% sharp drop in Sep exports on weaker demand from India and China. However, buying supports are likely to curb rapid selldown in anticipation of lower palm oil stocks and production.
• Today, FCPO is expected to trade cautiously ahead of the key MPOB/SGS reports. Overall, higher-than-expected stockpile and production coupled with weaker-than-expected exports are major catalysts to dampen FCPO further with key supports at RM2547 (50-d SMA), RM2538 and RM2525 (38.2% FR) territory.
• On the flip side, lower-than-expected stockpile and production coupled with higher -than-expected in exports are expected rerate FCPO prices higher towards RM2573 (20-d SMA), RM2584 (30-h SMA) and RM2606 (200-d SMA) levels.

• Overall, FCPO is expected to cap in range bound trading within 2540-2600 levels.

Source:Hong Leong Investment Bank Research - 10 Oct 2016