We are now less negative on the plantation sector than when we downgraded the sector in July 2008. Share prices have corrected substantially, palm oil price stabilisation measures have been introduced, fertiliser costs have come off 15-50% from their high and there are rising supply risks stemming from adverse weather conditions in major planting areas in South America. However, these positives are offset by concerns over a weakening of edible oil demand growth due to a sharper-than-expected global economic downturn, lower-than-expected crude oil prices, high palm oil inventories and declining government interest in biofuel mandates. We are keeping our UNDERWEIGHT stance on the regional planters as the stocks in Indonesia and Malaysia are trading at premium P/E valuations against the market and we think that the recent rise in CPO price is not sustainable unless the drought conditions in South America worsen. Wilmar and Indofood Agri are our top picks in the sector. Key de-rating catalysts are falling prices for CPO and crude oil, improved weather prospects in South America and a weaker-than-expected global economy.