TOCOM rubber tumbles to 2-1/2-month low on Shanghai slump

Benchmark Tokyo rubber futures tumbled to a 2-1/2-month low on Wednesday, marking their biggest single-day drop in more than two years, as slumping Shanghai futures and a surging yen spooked investor sentiment, prompting a flurry of sells.

The Tokyo Commodity Exchange rubber contract for December delivery <0#2JRU:> finished 11.7 yen, or 5.5 percent lower, at 201.8 yen ($1.66) per kg, its biggest one-day loss since April 2013. The contract earlier fell to as much as 200.5 yen, the lowest since April 21 this year.

“Plunging Shanghai futures, led by worries over falling Chinese stock prices and its impact on the country’s real estate market, caused a wave of sells in TOCOM rubber,” said Hiroyuki Kikukawa, general manager at Nihon Unicom Inc.

The most-active rubber contract on the Shanghai Futures Exchange for September delivery fell 765 yuan, or 6.04 percent, to finish at 11,910 yuan ($1,918.18) per tonne, its lowest level since Dec. 12, 2014.

Chinese stocks tumbled to four-month lows on Wednesday as panicky investors dumped shares across the board, even as the government tried to unveil supportive measures throughout the day session to stop the plunge.

A sharp rise in the yen also added to the pressure, dealers said.

The yen hit a six-week high of 121.65 against the dollar in late Asian trade, with investors seeking the perceived safety of the currency as Asian equities, notably volatile Chinese shares, fell across the board.

A stronger yen makes yen-denominated assets more expensive when purchased in other currencies.

The TOCOM benchmark, which set the tone for tyre rubber prices in Southeast Asia, had gained about 28 percent since its April low by early June to hit a 16-month high, but has since lost nearly 20 percent.

“Basically, the benchmark has lost most of the gains it had won,” Kikukawa said.

“Growing concerns over China along with uncertainty over the Greek debt crisis will keep weighing on rubber prices,” he said, citing the next psychological support at the April low of 194 yen.

The front-month rubber contract on Singapore’s SICOM exchange for July delivery last traded at 138.6 U.S. cents per kg, down 8.8 cents.