TOCOM hits fresh 7-year low as China worries drag

Benchmark Tokyo rubber futures hit a fresh seven-year low on Tuesday as investors stepped up selling on fears over Beijing's ability to revive its economy and plunging oil prices, but reports that Thai government may help rubber farmers limited the losses.

The Tokyo Commodity Exchange (TOCOM) rubber contract for June delivery <0#2JRU:> finished 2.6 yen, or 1.7%, lower at 146.9 yen (US$1.25) per kg. It earlier touched a low of 144.5 yen, the lowest since March 19, 2009.

The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, have lost nearly 8% this year.

"Scepticism over Chinese government's measures to bolster its economy and stabilise financial markets were the biggest reason for the fall," a Tokyo-based dealer said.

China stepped up efforts to curb bets against its currency and reassure sceptical investors, as its central bank set another firm fix for the yuan on Tuesday, backed by what dealers said was aggressive yuan buying offshore.

"Tokyo stock prices were tumbling while the yen was rising and oil prices slumping. They all pointed to a further downside," the dealer said.

The Nikkei share average slipped 2.7% after a market holiday on Monday, closing at its lowest in nearly a year.

The dollar edged down against the yen on Tuesday, moving back towards an over four-month low against the perceived safe-haven Japanese currency as crude oil prices continued to tumble. A firmer yen makes yen-denominated assets more expensive when purchased in other currencies.

Crude oil fell 3% on Tuesday, heading towards US$30 per barrel with levels not seen in over a decade, as analysts scramble to cut their price forecasts and traders bet on further declines.

The rubber market, however, got some help from reports that Thai government may support rubber farmers, dealers said.

Thailand's prime minister on Monday promised help for farmers in the world's top rubber producer and exporter, amid threats by farmers to protest if their demands for a guaranteed selling price are not met.

On the upside, vehicle sales in China grew 4.7% in 2015, slowing from 6.9% growth the previous year, an industry association said on Tuesday.

"But wide-spread bearish sentiment outweighed the news," the dealer added.

The most-active rubber contract on the Shanghai futures exchange for May delivery dipped 295 yuan to finish at 9,640 yuan (US$1,466.07) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for February delivery last traded at 106.7 US cents per kg, down 0.7 US cent.