KUALA LUMPUR, Sept 18: Malaysian crude palm oil futures extended falls on Wednesday because of persistent fears of rising stocks.

There was also speculation spread by Indian commodity traders that Malaysia could re-peg the ringgit, but, while the palm oil market was unsettled by the talk, other financial markets appeared oblivious.

Analysts see no pressure on the peg or any likelihood that Prime Minister Mahathir Mohamad, who is also acting finance minister, is ready to move on the currency any time soon.

The ringgit was fixed at 3.8 per dollar in 1998 to help cushion the country against the Asian crisis and to drive up exports.

Traders were clear about the prime reason why palm oil prices weakened.

The market went down because of fear of rising stocks and poor exports, said one trader.

At the close, the benchmark third-month December contract fell 19 ringgit at 1,343 ringgit ($353.42) a ton after trading as high as 1,366 ringgit. Volume was heavy at 3,089 lots.

Some technical analysts suggested that players should get out of the market which is likely to fall further because December contract had broken the 1,350 key support level. The next support level is seen at 1,300 ringgit.

The rumour that Mahathir might revalue the ringgit in the 2003 budget he presents on Friday caused a few nerves.

If the government does re-peg the ringgit, prices will fall, said one trader.

Private forecaster Ivan Wong has said end-September stock may reach 1.1 million tons, up from the psychological level of 1.0 million tons recorded in August. This month’s output is seen at 1.14 million tons, up from 1.1 million tons in August.

One freight broker said rates from Malaysia and Sumatra in Indonesia to main destinations such as India, China and Pakistan were expected to fall this week because of sagging demand.

There are some ship owners who still refuse to cut down the rates even though demand is slow. The palm oil market seems to be on hold ahead of the edible oil conference in India, he said.

Mumbai is hosting the two-day edible oil conference which will start on September 22 in Mumbai and discuss global supply/demand scenario for 2002/03.

Shipment bookings to India may have reached around 300,000 tons so far for Sept, but nobody knows what will happen in October, said the broker.

On the physical sector, September/October crude palm oil for the southern and central regions saw bids at 1,355 ringgit a ton and offers at 1,360 ringgit.

Trades were reported at between 1,355 and 1,360 ringgit for both sides.—Reuters