Saturday, July 18, 2020
Palm Oil Production Forecast
July 15, 2020 11:59 am +08
1. Malaysia’s CPO production is expected to go above 20 million tonnes, while Indonesia should add one to two million tonnes to its 2019 production levels, as yield stress from 2019’s dryness is over.
2. The high cycle of Malaysian production had started in March 2020 and is expected to continue all the way till November 2020,
3. while Indonesia’s production is expected to surge strongly in 2H20 (starting from August 2020 to September 2020)
4. a high palm oil inventory in November. expecting Malaysia’s palm oil inventory to be between 2.8 million to 3 million tonnes, with Indonesia’s to be between 8 million to 8.5 million tonnes in November — mainly on account of high production while demand remains weak.
5. The commodity prices to recover in the second quarter of 2021 (2Q21), with higher demand recovery from the hotel, restaurant and catering (HORECA) segment.
6. Demand is expected to be weak in 2020 as Covid-19 has negatively impacted the HORECA segment. Mistry added the current high vegetable oil import to India is mainly due to replenishment of the current low pipeline.
7. the pipeline has been replenished, monthly palm oil imports are estimated at 600,000 tonnes — with the country’s vegetable oil demand to be flat year-on-year in 2020 and to normalise in 2Q21.
India’s total import of vegetable oils should come in at between 13 million to 13.5 million tonnes in 2020 (from the 15.5 million tonnes in 2019), and rise back to 15 million to 15.5 million tonnes in 2021.
Once the pipeline has been replenished, 600,000 tonnes of palm oil a month are expected to be exported to India, as well as 300,000 tonnes of soybean oil and 200,000 tonnes of sunflower oil. Furthermore, Indian imports might be slightly higher in September due to the festive season there.
India’s palm oil consumption is only at 80% of pre-Covid-19 levels and is expected to increase to 90% in 4Q20. Palm oil consumption in the country is expected to normalise only in 1Q21 or 2Q21.
Meanwhile, palm oil demand is still viable in Europe due to tight rapeseed oil supplies and palm oil gaining market share given its status as the cheapest vegetable oil. This is particularly the case in biodiesel, which makes up 50% of total European demand for palm oil.
All in all, Leow and Yow agree that palm oil inventory will rise by 4Q20, but believe that it will not be as high as forecasted by Mistry.
“The key variance between our expectation and Mistry is in production forecast. We are expecting lower production from Malaysia and a marginal increase in Indonesian production for 2020. With the stronger-than-expected 2Q20 production from Malaysia, total production for 2020 could be closer to 19.0 million-19.3 million tonnes vs our forecast of 18.7 million tonnes now,” they said.
The duo have maintained their “market weight” call on the sector as they reckon CPO price recovery would have factored in the recovery of crude oil prices, CPO demand recovery and Indonesia’s B30 biodiesel programme.
Plantation stocks under their coverage are trading at mean or one standard deviation above their five-year mean price to earnings ratio, reflecting the narrow trading band for CPO prices at RM2,100 to RM2,500 a tonne.
Any re-rating has to come from stronger CPO prices, and catalysts for such a move are the substantial improvement in demand or production failing to recover by 2H20.
The research house maintained its CPO price assumptions of RM2,200 and RM2,350 a tonne for 2020 and 2021 respectively.
Friday, October 11, 2019
Ringgit and Viet Dong
InThis how Vietnam manipulating the Dongs. The Dong and ringgit moved in tandem from 2014 to 2016 as against the USD. In 2017 ringgit (white line) appreciated but Vietnam Central Bank maintain the Dongs at same level..by early 2018 when USD strengthened, the ringgit and dongs moved down in tandem . By mid 2018, Trump has targeted Vietnam as currency manipulator and consequently the Viet let the Dongs float freely. By then you can see the Dongs has been undervalued than the ringgit.
Thursday, September 19, 2019
Wednesday, May 15, 2019
EWM
iShares MSCI Malaysia ETF is an exchange-traded fund incorporated in the USA (NYSE symbol -EWM) . The EWM is to provide investment results that correspond to the performance of the Malaysian market, as measured by the MSCI Malaysia Index. Simply means it mimic the index.
The EWM invests in a representative sample of index stocks using a "portfolio sampling" technique.
ETF is an investment fund and traded just like buying and selling shares.
The MSCI Malaysia Index measure the performance of the large and mid cap segments of the Malaysian market and currently it has 44
constituents or Malaysian shares. (FBMKLCI has only 30 shares of big cap companies)
Who is MSCI. .
MSCI Inc. is a Global provider of equity, fixed income, hedge fund stock market indexes, and multi-asset portfolio analysis tools. It operates in similar to FTSE Ltd (partly owned by London Stock Exchange) and Standard & Poor's ( publisher of the SP500 and Dow Jones Industrial Index). MSCI was founded by Morgan Stanley, a US investment bank.
MSCI Malaysia Index is widely follow by foreign fund managers who invested shares in Bursa Malaysia. These fund managers basically buy and sell EWM for the need to be invested in Malaysian shares without holding any of those shares, and hedging. Some sort similar to Bursa derivative market (BDM) Kuala Lumpur Stock index future ie FKLI.
Hedging using EWM
Let say, a fund has subscribed to IPO of Malakoff Bhd at 1.70 in 2014. By the end of 2015, Malakoff price fall to RM1.40. When Malakoff price keep falling, the fund manager has 4 alternatives.
1. Cut loss ie sold the shares with a loss.
2. Hold the shares and by end of 2015 financial provide the impairment (TH screw up on this)
3. Average down ie buying further Malakoff shares to average down the cost of holding.
4. Hedging. This last alternative is not allowed for unit trust such as ASB but hedge fund and non unit trust investment managers can used this hedging mechanism.
The easiest hedging for holding Malakoff shares is buying a put option. A put option is the right to sell. Let see...Hold Malakoff shares at RM1.70 a shares. A put option was bought with a strike price of RM1. 70. We paid the premium for the put option and hang on. By end of 2015 when Malakoff fall to RM1.40 we settle the deal by delivering Malakoff shares at RM1.70 to the seller of put option. In reality Buying /Selling put and call option is more complex than above. Option trading is offer by Bursa Malaysia but never commercially take off since local investors are not that sophisticated.
Hedging using EWM or FKLI is simply taking the opposite direction. By holding (buying) Malakoff, the management will sell EWM. Theoretical, you sell EWN when Malakoff was at 1.70. As overall stock market fall and Malakoff price fall to 1.40..EWM which is based on Index also fall. So we buy back EWM at lower price than when we sell ie short selling. The profit from EWM will offset the loss for Malakoff. This is the basic mechanic of hedging using EWM or FKLI...on reality it is more complex and involve statistical and financial calculation.
So as we can see, as the market fall foreign fund managers have dump substantial shares earlier. Since they are hedging, they will continued dumping the balance of the shares to pull down the index and subsequently the EWM further to make more profit on the short selling of EWM. The net effect is that the profit from short selling EWM is greater than the loss of selling the shares.
This is the game of vultures ie the foreign fund managers.... and Bloomberg who livelihood depend on vultures subscribing to their network keep spewing news slanting in favour of the vultures.
Sunday, May 5, 2019
Gold and USD
Gold vs. the Dollar
Gold is an asset has it has intrinsic value ie similar to investment in a house or other property such your kebun durian or kelapa and shares.
As gold is mostly quoted in USD its value fluctuate over time, sometimes in a volatile fashion. As a rule, when the value of the dollar increases relative to other currencies around the world, the price of gold tends to fall in U.S. dollar terms. It is because gold becomes more expensive in other currencies. As the price of any commodity moves higher, there tend to be fewer buyers, in other words, demand recedes. Conversely, as the value of the U.S. dollar moves lower, gold tends to appreciate as it becomes cheaper in other currencies.
Simply means, demand tends to increase at lower prices and vice versa.
While the relationship between the value of the U.S. dollar and gold is important, the dollar is not the only factor that affects price of gold. Interest rates also affect the price of gold.
Gold does not yield interest in itself; therefore, it must compete with interest-bearing assets for demand.
When interest rates move higher, the price of gold tends to fall, since it costs more to carry the metal. In other words, other assets will command more demand because of their interest rate component.
Although this was a factor few years back but currently the relationship gold eith interest rate wad not that strong.
There is also a psychological factor attached to the value of gold. The price of gold is often sensitive to the overall perceived value of fiat or paper currencies in general terms. During times of fear or geopolitical turmoil, the price of the historic metal tends to rise as faith in governments falls. During times of calm, the price of gold tends to fall.
As perhaps the world's oldest and most storied currency, gold is an important barometer in terms of global economic and political well-being
So while rising interest rates may increase the U.S. dollar, pushing gold prices lower (gold prices are denominated in USD), factors such as equity prices and volatility coupled with general supply and demand are the real drivers of the price of gold. If you look at the chart, the blue line is DXY ie Dollar index. By September 2018 gold and DXY are positively correlated. This is basically due to demand of gold. It was reported in 4th quarter last year Central bankers of most countries have been buying the good.In fact last year, holding of gold by Central Bankers were the highest in 50 years.
Ringgit and DXY
Dollar weakness no effect on ringgit....The inflow into Bursa Malaysia has more impact on the Ringgit.. Hopefully FBMKLCI recovered.
Saturday, May 4, 2019
XAUUSD Fib retracement
Continuation on my April 23 pist on Gib retracement..this is on gold.
The AB rebounce moved passed not only 61.8 but also beyond 78.6 indicating a bullish that it is expected to penetrate the resistance at A. Currently prices are govern by the BC upthrust and the correction is st 38.2. As long as the correction did not ho beyond 61.8 uptrend in gold is still intact.
Thursday, May 2, 2019
Tuesday, April 30, 2019
Monday, April 29, 2019
Saturday, April 27, 2019
DXY and USDMYR
The chart clearly showed by Mid March the Dollar strength has no effect on weakness of ringgit. It is more of withdrawal of hot money ie foreign fund Managers from the list cal market. Currently most people are not that bullish of the Dollar ie waiting it turn diwnwards in near future.
Friday, April 26, 2019
Opening Range (OR) method
One way to identify key price points in the market is when the market sentiment is likely to lead change in the market/stocks short term direction or an acceleration of its current momentum. By using these key inflection points we could read market sentiment and anticipate a market or stock’s next move.
Normally the first 5 minutes or 30 minutes or even rhe first hour of trading, traders or investors are reacting to any previous day or overnite news, This made such opening period emotionally charged and informationally rich. Therefore, there are a lot of potential reasons for the flurry of trading activity that occurs when the market opens. The initial flurry of activity will generally settle down by the end of 5 min to one hour.
I like to define the flurry activity as the opening range (OR) , and I refer the first 30 min as the OR. The OR is basically the price high and low for the day let say 9.am for Bursa Malaysia or at 9:30 am for FCPO. The OR is like a price discovery period. The battle between bulls and bears in the morning will often determine the significant price levels for the rest of the day
The most basic application of OR is when price trade above the OR’s high we are in bullish bias and if price below OR’s low we should have a bearish bias.
Thursday, April 25, 2019
Current Account
Among the 3 countries Malaysia has the lowest ratio but since 2018 ringgit performance of better than S Korea. This could be that S Korea and Thailand historically maintain a ratio of 7, while Malaysia is half of that. For the last two years, S Korea rstio has fallen to an average of 4.
A h8gh current ratio for both countries indicate that both countries export morevthan import while local consumption is relatively low.
Let see the equation.
Nation Income Y
is Y=C+I+G+(X-M) which is equivalent to
Y-C-G-I=X-M
Consolidating C and G, therefore Income(Y) less Consumption and G is equal Saving (S)
S-I = X-M, X-M is the current account ignoring the less significant interest factor and transfer factor.
Note : Current Account is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid)
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