TOCOM dives to 6-week low, led by Shanghai plunge

Benchmark Tokyo rubber futures hit 6-week lows on Wednesday, pressured by a nearly 8% plunge in Shanghai futures to the lowest since November 2015, amid oversupply concerns.

The Tokyo Commodity Exchange (TOCOM) rubber contract for November delivery finished 5.2 yen, or 2.5%, lower at 202.5 yen (US$1.83) per kg, after touching the lowest since April 20 of 201.2 yen earlier in the session.

For the month, it lost 6.8% and booked a fourth consecutive monthly decline.[X] CLOSESponsored Content "Tokyo was firm in early trade, but it came under pressure after Shanghai tanked on rumour that the Chinese government may sell its rubber reserves to replace with new ones," said Jiong Gu, an analyst at Yutaka Shoji Co.

The most-active rubber contract on the Shanghai futures exchange for September delivery plunged 1,060 yuan, or 7.8%, to finish at 12,510 yuan (US$1,835) per tonne, hitting the lowest since November 2015. For May, it lost about 12%.

"There were some speculative selling which also added to pressure," Gu said.

The sharp sell-off came despite healthy economic data in China, the world's biggest rubber consumer.

China's manufacturing and services sectors expanded at a solid pace in May thanks to robust construction and infrastructure investment, welcome news for authorities trying to strike a balance between maintaining stable economic growth and defusing debt risks.

"Since the Shanghai benchmark slid below a key 13,000 yuan mark, we may see more technical selling," Gu added.

The front-month rubber contract on Singapore's SICOM exchange for June delivery last traded at 147.0 US cents per kg, down 6.1 US cents.