With positive outlook from the Malaysian Palm Oil Board (MPOB) director-general, where global consumer demand will still outpace supply, and the natural climate effects (El Nino and El Nina) pressuring supply and production levels, palm oil prices are bound to increase, especially after being beaten badly by the market in the past few years.
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Besides the above reason, there is also signs of increasing demand in China, evident from the recent metal prices rally and, real estate and domestic infrastructure spending within China. Given Trump's Presidential win in the US, where one of his campaign promises is also to increase infrastructure spending in the US, this also adds to further speculation on increasing demand.
Source: Bloomberg
Source: Chart Nexus
The above charts are Golden Agri, Bumitama Agri and Wilmar International respectively. As you can see, all 3 of them are hammered badly over the past few years but have made higher highs recently with Golden Agri breaking through the descending trendline which forms a descending triangle. The other 2 seems poised to do the same as well. This suggests bullishness in terms of technical analysis. Another possible catalyst is the reduction of short sellers in Golden Agri, leading to its break out.
However, there must be caution in undertaking positions in these companies as there are still risks in investing.
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Note: the author currently has an investment position in Golden Agri.
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