Rubber Drops, Reversing Earlier Gains, as Asian Stocks Slump

By Aya Takada

May 20 (Bloomberg) -- Rubber declined, reversing earlier gains, as a slump in Asian stocks raised concern that the economic recovery may stall and reduce demand for the raw material used in tires.

Futures in Tokyo dropped for the first day in three. The price reached the highest level since May 11 earlier as clashes between Thai security forces and protesters stoked concern that supply from the world’s largest exporter may be disrupted.

Asian stocks tumbled after slower-than-estimated growth in Japan drove Tokyo shares lower for a second day. While the Japanese economy grew at the fastest pace in three quarters, the 4.9 percent expansion was less than the 5.5 percent median forecast of 21 economists in a Bloomberg survey.

“Losses in the equities markets eroded investor confidence in the recovery, leading to sales of rubber futures,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

Rubber for October delivery, the most-active contract, lost 1.5 percent to settle at 263.8 yen per kilogram ($2,886 a metric ton) on the Tokyo Commodity Exchange.

The MSCI Asia Pacific Index lost 1.7 percent to 112.81 at 4:53 p.m. in Tokyo, while Japan’s Nikkei 225 Stock Average fell 1.5 percent to 10,030.31. Japan’s Finance Minister Naoto Kan warned that the economy was in a deflationary state.

Risk Appetite

The risk appetite of investors also dropped after Germany this week introduced a temporary ban on naked short-selling to calm the region’s financial markets.

“Germany’s short-sale restriction is prompting suspicion that the situation is actually worse than investors think,” said Mitsushige Akino, who oversees the equivalent of $450 million at Ichiyoshi Investment Management Co.

Losses in rubber futures were limited as fighting continued in Bangkok a day after the forced surrender of anti-government protesters left 16 people dead.

Rioters set fire to 31 buildings including several banks in Bangkok, Thanom Onketpol, an adviser to the city’s governor, said on the PBS television network. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen, both in the northeast of the country.

“Riots in Thailand were spreading from Bangkok to other areas, raising concern that violence may escalate further and disrupt transportation of the raw material,” Shigemoto said.

Rubber futures have retreated 22 percent since reaching a 21-month high of 338.5 yen on April 16 on a seasonal drop in supply from Thailand.

Producers in Thailand’s south, the major growing area, have resumed tapping rubber trees as the low-production period known as wintering ends, Shigemoto said.

Cash prices in Thailand advanced on concerns that supplies will remain low because of drought, the Rubber Research Institute of Thailand said on its website today.

The price of Thai RSS-3 grade rubber for June delivery, which excludes freight and insurance, gained 1.7 percent today to 117.85 baht ($3.64) a kilogram, it said.

September-delivery rubber on the Shanghai Futures Exchange dropped 0.4 percent to 21,765 yuan ($3,188) a ton, reversing an earlier advance of 2.4 percent.

(bloomberg.com)