The Australian Bureau of Meteorology announced yesterday that El Niño thresholds have been reached in the tropical Pacific from the first time since March 2010. An ABM scientist added that “there’s always a little bit of doubt when it comes to intensity forecasts, but across the models as a whole we’d suggest that this will be quite a substantial El Niño event”. The Japanese Meteorological  Agency  also  confirmed  that  the  El  Niño  phenomenon  had begun and forecast it would continue into late 2015. (Source: AFP)

Comments:  The  latest  forecasts  by  the  Australian  and  Japanese meteorological  agencies  follow  the  9  April  forecast  by  the  US  NOAA  that climatic features still point to weak El Niño conditions but models now point to  a  greater  than  60%  chance  that  this  El  Niño  will  last  through  autumn. However, the deputy director of the NOAA’s climate prediction centre was quoted yesterday that "it's getting close to what we would term moderate". It remains to be seen if the ABM forecast of a “substantial” event this year will be  confirmed  by  the  next  NOAA  advisory  to  be  released  tomorrow.  A forecast and widespread expectation of a “strong” El Niño event early last year pushed the 3-M CPO futures to as high as RM2,900/MT but failed to materialise.

We  maintain  our  NEUTRAL  sector  weighting.  Plantation  stock  prices  are easing and may offer trading opportunities if the trend continues.

Source: Affin Hwang Capital Research - 13 May 2015