Rubber Gains From 6-Week Low as Stock Rally Boosts Confidence

By Aya Takada

July 23 (Bloomberg) -- Rubber recovered from a six-week low as Asian stocks extended a global rally, boosting investor confidence in economic growth and raising speculation that demand will increase for the commodity used to make tires.

Futures in Tokyo climbed as much as 3 percent after slumping yesterday to the lowest level since June 9. The price also increased as a drop in the Japanese currency against the dollar raised the appeal of yen-based contracts.

Asian stocks increased, driving the MSCI Asia Pacific Index to its third straight weekly advance, as U.S. companies from AT&T Inc. to United Parcel Service Inc. raised profit forecasts. The yen fell against all of its major counterparts on speculation Japanese policy makers may act to weaken the currency to support economic growth.

“Rubber chased a rally in stocks and other industrial commodities,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “Futures are also drawing support from the currency market.”

December-delivery rubber increased as much as 7.7 yen to 265 yen per kilogram ($3,047 a metric ton) before trading at 262.6 yen on the Tokyo Commodity Exchange at 10:55 a.m.

The MSCI Asia Pacific Index gained 1.3 percent to 117.10 as of 10:41 a.m., extending its increase this week. Japan’s currency, which yesterday traded within 0.1 yen of its 2010 high reached last week, retreated on the prospect that Prime Minister Naoto Kan’s administration will add pressure on the Bank of Japan to increase monetary easing measures.

Low Stockpiles

Rubber futures also increased amid speculation that low stockpiles in Japan may make physical delivery difficult when the nearby contract expires on July 26, Sugata said.

Natural-rubber stockpiles monitored by the Tokyo exchange dropped by 29 percent to 1,341 tons as of July 10, data from the bourse showed this week. It was the lowest volume since at least 2001, according to exchange spokesman Seiki Ichimura.

Speculators with short, or sell, positions in the nearby contract must buy them back by the expiry date, unless they can deliver the raw material. July-delivery rubber surged 4.3 percent to 372.5 yen. Last month, the June-delivery contract expired at 372 yen.

November-delivery rubber on the Shanghai Futures Exchange gained 2.1 percent to 22,065 yuan ($3,256) a ton at 10:04 a.m. local time.

Cash rubber prices in Thailand declined yesterday as Chinese buyers have put off orders and some investors are concerned that there’s a weaker pace of recovery in China and the U.S., according to the Rubber Research Institute of Thailand. The Thai benchmark price fell 1 percent to 103.65 baht a kilogram, the group said yesterday on its website.

(bloomberg.com)