OBSERVATIONS: As with most world equity and commodity markets, the Kuala Lumpur CPO futures market jumped at first on news of the Bush administration’s announcement of a US$700 billion (US$1 = RM3.43) rescue plan for the US financial sector.
Reacting to news of the US rescue plan and the jump in US soyabean oil futures, Kuala Lumpur CPO futures market players bidded the actively-traded December 2008 contract up in early trade to an intra-week high of RM2,404. However the local market fell back in the latter part of last week in tandem with other world markets as buying euphoria started fading on news of opposition to the Bush administration’s proposed rescue package.
The December 2008 contract closed last Friday at RM2,313, still up RM54 or 2.39 per cent for the week.
This market’s pullback in the latter part of last week also was due in part to concerns that, because of the poor export performance thus far this month, palm oil stocks would start piling up again. According to export monitor Intertek Agri Services, September 1-25 exports of palm oil not only fell to a three-month low of 981,637 tonnes, they were down 160,000 tonnes or 14 per cent from that shipped out in the corresponding period in August, suggesting that end-September stocks are likely to top end-August stocks. The Malaysian Palm Oil Board had figured end-August 2008 stocks of palm oil at 1,848,130 tonnes, still a deadweight as far as the local industry is concerned.
Conclusion: Investor ambivalence, because of uncertainty over whether US lawmakers will approve the proposed US rescue package, and mixed technical signals suggest that this market could be stuck within the near term RM2,040-RM2,340 band in early trade this week.
However, market players should be wary of the appearance last Tuesday of a bearish piercing candlestick pattern, a signal suggesting that this market’s undercurrent, on balance, is still more bearish than bullish.
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