Rubber Advances as Thai Political Turmoil Raises Supply Concern

By Aya Takada and Supunnabul Suwannakij

May 19 (Bloomberg) -- Rubber gained for a second day, reversing earlier losses, as escalating violence in Thailand’s capital stoked speculation that supply from the world’s largest exporter may be disrupted.

Futures in Tokyo advanced after declining by as much as 2.1 percent on lower oil prices. Oil fell as the euro slumped to the lowest level in four years after Germany banned some speculative sales, triggering concern Europe’s debt crisis will worsen.

Gunfire and explosions rocked central Bangkok today as troops backed by armored vehicles surrounded a camp occupied by several thousand demonstrators seeking to oust Prime Minister Abhisit Vejjajiva. Still, most of Thailand’s rubber estates are in the south, hundreds of kilometers from the disturbances.

“Escalating violence in Thailand raised speculation supply may be affected,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said by phone.

Rubber for October delivery, the most-active contract, gained 2.2 percent to settle at 267.7 yen per kilogram ($2,916 a metric ton) on the Tokyo Commodity Exchange.

The price earlier declined to as low as 256.6 yen as a drop in oil and stocks spurred investors to cut their holdings of risk assets, Saito said.

Germany’s Ban

Germany prohibited naked short-selling and speculating on European government bonds with credit-default swaps, sparking anxiety among investors about increasing regulation. The ban, which lasts until 2011, also applies to the shares of 10 banks and insurers, German financial regulator BaFin said.

Crude oil for June delivery fell 1.2 percent to $68.60 a barrel on the New York Mercantile Exchange at 1:17 p.m. in Tokyo. Earlier, the price slumped to a seven-month low as a stronger dollar weakened the appeal of the commodity.

“Investors are afraid that Germany’s ban on naked trading will reduce people’s appetite for risk,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

Rubber futures have retreated after touching a 21-month high of 338.5 yen per kilogram April 16 on a seasonal drop in supply from Thailand.

“Ongoing political unrest doesn’t disrupt rubber exports,” Navarat Kaewpratarn, senior marketing official at Future Agri Trade Co., said today by phone from Bangkok.

September-delivery rubber on the Shanghai Futures Exchange added 1.2 percent to settle at 21,730 yuan ($3,183) a ton.

(businessweek.com)