Weak palm oil prices likely in medium term-HSBC

BANGKOK: HSBC expects a medium-term direction of palm oil prices to
be underpinned by soft demand, with weak economic growth expectations
for major consumers -- China, India and Europe -- capping industrial
demand.
The broker cut its fiscal year 2012 average palm oil
price forecast by 5 percent to $1,032 per tonne. For fiscal year 2013,
it raised the average palm oil price forecast by 2 percent to $994 per
tonne.
"Unlike consensus, we believe negative price momentum will prevail going forward," HSBC said in its Asian Palm Oil report.
Extreme
weather conditions in major agricultural regions are being reflected in
commodities such as soybeans prices, up 46 percent year to date, but
palm oil - the closest substitute - has been absent from this rally,
falling 5 percent year to date.
"Now with pricing spreads well
above normal levels, palm oil will likely see near-term price support.
We believe this presents an opportunity to reduce weightings in the
sector," it said.
HSBC downgraded Indonesia-listed Astra Agro
Lestari to 'underweight' from 'neutral', cutting the target price to
22,000 rupiah from 25,200 rupiah versus Wednesday's stock close of
20,200 rupiah.
Astra Agro had fallen 6.9 percent in 2012, underperforming a 6.6 percent gain of the broader Jakarta's Composite Index .
HSBC's key underweight-rated stocks included Singapore-listed Wilmar International Ltd and Malaysia-listed IOI Corporation Ltd.
For long-term exposure to emerging market consumption, the broker said it preferred plantations with structural growth, with First Resources Ltd and Genting Plantations among its overweight-rated stocks. - Reuters