Affin Daily Insight (LV) - 11 July 2014 - PLANTATION / BANKING / BANKING - MERGER / AEON / ECONOMY - IPI / ECONOMY - OPR / ECONOMY - ASEAN OUTLOOK / DMR

Top Calls

Sector Update � Plantation (OVERWEIGHT, maintain) - Production trended lower in June, inventory down CPO production in June 2014 unexpectedly declined by 5.3% MoM to 1.60m MT. Contrary to our expectations, FFB and oil yields declined for all three regions, particularly in Sabah and Sarawak. It may be due to the delayed impact of prolonged dry weather in the early part of the year as well as the exceptionally dry conditions since then as the impact of a large number of Indonesian workers leaving Malaysia for the Ramadan holidays is likely to be felt only in July and August. The lower CPO production and June exports of 1.48m MT coupled with higher domestic disappearance and sharply lower imports led to a 10.0% MoM decline in closing inventory to 1.66m MT. Soybean oil premium and CPO premium over Brent crude have also narrowed. Nevertheless, CPO 3-Month futures remain weak as traders track the prospects of higher CPO output and another record US soybean production. We maintain our CPO ASP forecasts, sector OVERWEIGHT rating and stock recommendations.

Other Calls

Sector Update � Banking (NEUTRAL, maintain) - A 25bps hike in OPR � AFG the key beneficiary

Sector Update � Banking (NEUTRAL, maintain) - Greenlight for mega merger talks

Flash Note � AEON Co. (ADD, maintain) - Landbank for future expansion

Economy � IPI - May�s IPI rose strongly, led by manufacturing output

Economy � OPR - BNM raised overnight policy rate by 25bps to 3.25%

Economy - ASEAN Outlook - Weekly Wrap (4 - 10 July 2014) - Bank Indonesia kept policy rate unchanged at 7.5%

Debt Market Research - MPC hiked by 25bp, statement open ended on further rate hikes, biddish sentiments likely in the near-term

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