KUALA LUMPUR (Jan 4): Crude palm oil (CPO) prices may have weakened to bottoming levels, but a high stockpile and absence of positive demand catalysts are likely to sustain prices in the first quarter of 2019, according to Hong Leong Investment Bank (HLIB) Research.

The lack of catalysts includes expected lacklustre demand from India, which is the biggest importing country for Malaysian palm oil, and the recent plunge in crude oil price that will deter discretionary biodiesel blending, HLIB Research said.

That being said, the research house expects CPO prices to recover from the second quarter of 2019 onwards. It is expected to be supported by a weakening of the ringgit, the high chance of El Nino forming in the first quarter of 2019 and the extension of biodiesel mandates in Malaysia and Indonesia.

"In our strategy report (dated Dec 19, 2018), we lowered our 2019 and 2020 average CPO price forecasts by RM200 per tonne to RM2,300 per tonne in 2019, and RM100 per tonne to RM2,400 per tonne in 2020," it said in a note today.

HLIB Research maintained its 'neutral' call on the sector and has mostly 'hold' ratings on plantation stocks under its coverage.