OSK Stays Neutral On Southeast Asia Palm Oil Sector

OSK Investment Bank believes palm oil prices will stage a rally until July as production in Indonesia may suffer a production disruption due to delayed effects from the 2009 drought. The Malaysian Palm Oil Board put Malaysia's April CPO output at 1.53 million tons, while exports reached 1.33 million tons, up 7.8% on month. "The rise in inventory to 1.67 million tons is still far from being high enough to cause a collapse in prices," the house says. Nonetheless, it believes palm oil will fall in the second half as the sector moves into bumper crop period. "Investors looking to cash in on the prices rise should buy Indonesia-based firms," Tai says. He keeps Golden Agri-Resources Ltd. (E5H.SG), PT London Sumatra Indonesia (LSIP.JK) and First Resources Ltd. (EB5.SG) at Buy. Golden Agri is unchanged at S$0.68, London Sumatra is up 2.1% at IDR2,450 and First Resources is down 0.7% at S$1.44