TOCOM rubber dips to more than 2-week low amid worries over China demand

Benchmark Tokyo rubber futures fell more than 2 percent on Monday, hitting two-week lows amid worries over slow demand and a volatile stock market in China, and a plunge in Shanghai rubber futures.

The Tokyo Commodity Exchange rubber contract for December delivery <0#2JRU:> finished 5 yen, or 2.4 percent, lower at 203.6 yen ($1.65) per kg, after touching 202.6, the lowest since July 9.

The July contract expired at 194.1 yen on Monday.

“The TOCOM market came under pressure as Shanghai futures deepened their losses,” said Toshitaka Tazawa, an analyst at Fujitomi Co.

The most-active rubber contract on the Shanghai futures exchange for January delivery fell 555 yuan, or 4.3 percent, to finish at 12,455 yuan ($2,005.73) per tonne.

“Investors are really worried about China, not only on its demand, but also on its volatile equity market,” Tazawa added.

China stocks plunged more than 8 percent, their biggest one-day drop in more than eight years, as a government-triggered rebound petered out amid profit-taking, concerns over economic health and fears of an end to Beijing’s inclination toward looser monetary policies.

“If Chinese share prices continue to slide and weigh on Shanghai rubber prices, TOCOM may head further down to test its April low of 194 yen,” said a Tokyo-based dealer.

The front-month rubber contract on Singapore’s SICOM exchange for August delivery last traded at 138.5 U.S. cents per kg, down 3.9 cent.