Malaysia and Indonesia have formally agreed to set up the Council of Palm Oil Producing Countries (CPOP) to strengthen industry cooperation between the two countries, which together account for 85% of world palm oil production. The council will help to set global standards, determine palm oil stockpiles and counter threats to the industry. Malaysia and Indonesia have also agreed to establish a green economic zone in Indonesia to develop the palm oil downstream sector. (Source: Business Times)

Comments: The setting up of CPOP, to be based in Jakarta, will help to boost CPO prices and the long term outlook for the Malaysian and Indonesian palm oil industry. Follow up actions and recommendations to be submitted by a task force by 15 November 2015 will provide greater clarity on the steps to be taken to boost CPO prices. We maintain our CPO ASP assumptions of RM2,150/MT for 2015E and RM2,400/MT for 2016E-17E. Sector rating remains at NEUTRAL. MPOB is scheduled to release production, exports and stocks data for September 2015 today.

Source: Affin Hwang Capital Research - 12 Oct 2015