CPO Pullback likely but not a bear crude palm oil futures mart 30 Nov 2009

OBSERVATIONS: The Kuala Lumpur CPO futures market is likely to beat a retreat in early trade this week – for two reasons.

The first is that, having risen to a 15-week high of RM2,521 a tonne last week, this market is high up in technical overbought territory and is ripe for a correction. The actively-traded February 2010 contract settled last Thursday (the market was closed last Friday for the Aidiladha festival) at RM2,482, up RM63 or 2.60 per cent over the week.

The second reason is that, having been closed last Friday for the Aidiladha holiday, this market was unable to react to the fallout from the crisis of confidence resulting from the Dubai sovereign debt deferment (many analysts call it a default). It will have to play catch-up (or catch-down?) with the falls in world equities and commodities markets overall.

The Dubai government, through Dubai World, reportedly owes US$59 billion (US$1 = RM3.38) and has asked its creditors for a six-month deferment in repayment. But there’s no guarantee repayment will be forthcoming even after the six months is up.
If the present crisis of confidence is confined to the Gulf region, it could blow over and turn out to be a storm in a teacup. But if it escalates into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s, then world equity and commodity markets will feel the pain.

The Palm Jumeirah is a man-made island created using land reclamation by Nakheel, a company owned by the Dubai government. It is one of three islands called The Palm Islands which extend into the Persian Gulf, increasing Dubai’s shoreline by a total of 520 km. The Palm Jumeirah is the smallest and the original of three Palm Islands (Palm Jumeirah, Palm Jebel Ali and Palm Deira) under development by Nakheel. It is located on the Jumeirah coastal area of the emirate of Dubai, in the United Arab Emirates (UAE).

There’s no telling now how the present debacle will pan out. So, market players may well heed this market maxim: when in doubt stay out. Which could halt the present short-term palm oil futures bull run in its tracks.

Conclusion: RM2,340 is the immediate short-term support level and this market has quite a long way to fall from last week’s closing price of RM2,482 before it can technically be classified as having turned into a short-term bear.

EVEN DAVID BECKHAM & A FEW ENGLISH FOOTBALLERS BOUGHT PROPERTIES IN JUMEIRAH PALM RESORTS.