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Rubber slumped after China raised borrowing costs for the first time since 2007, boosting speculation demand from the world’s largest user may weaken.
The most-active contract on the Tokyo Commodity Exchange lost as much as 3.1 percent to 328 yen per kilogram ($4,031 a metric ton) before settling at 335.2 yen. The price reached 343 yen on Oct. 15, the highest level since July 2008.
China’s central bank yesterday raised the benchmark one- year lending rate to 5.56 percent from 5.31 percent and the deposit rate to 2.5 percent from 2.25 percent as policy makers attempt to curb lending and prevent an asset-price bubble. The move comes days before Group of 20 officials gather in South Korea to discuss the global economy amid disagreements over whether the yuan is undervalued.
“Rubber pulled back as news on China and the U.S. mortgage problems were coming in,” Felix Yeo, trading manager at the Singapore unit of Marubeni Corp., said by phone today.
“The action may curb expansion in Chinese demand for raw materials,” Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., said today by phone. “The news also triggered sales as the market was ripe for profit-taking after a rally.”
Before today, rubber futures in Tokyo had gained 7.8 percent this month, heading for the best monthly performance since February.
March-delivery rubber on the Shanghai Futures Exchange fell as much as 2.8 percent to 30,845 yuan ($4,632) a ton before closing at 31,785 yuan. The contract reached a record 33,000 yuan yesterday.
Asian stocks extended a global sell-off as China’s rate increase raised concern that the economic recovery may slow. Thirteen of the 19 economists surveyed by Bloomberg News last month forecast that lending rates would stay unchanged this year. Central bank Governor Zhou Xiaochuan on Oct. 8 signaled that bank reserve requirements and bill sales were sufficient tools to control inflation.
Taken by Surprise
“The Chinese rate hike took the market by surprise,” said David Taylor, a market analyst at CMC Markets Ltd.
In the cash market, auctioned price of RSS-3 grade rubber for shipment in November dropped 0.3 percent to 112.19 baht ($3.74) a kilogram today as the Chinese rate hike sparked worries that the economy of the world’s largest natural rubber buyer may slow, according to the Rubber Research Institute of Thailand. Limited supply will support prices, the institution said.
A severe drought in Yunnan at the beginning of this year and torrential rains this month in Hainan, the top two producing areas in China, will reduce domestic rubber output, according to Guo Cheng, an analyst at Yongan Futures Co.
Natural-rubber imports by China, the world’s largest user, jumped 19 percent from a month earlier to 190,000 tons in September as the nation’s passenger-car sales to dealerships quickened from August on additional incentives for buyers.
Wholesale deliveries of passenger cars rose 19.3 percent to 1.21 million, accelerating from 18.7 percent in August, the China Association of Automobile Manufacturers said Oct. 12.
Dealers stepped up discounts in China, the world’s largest auto market, after passenger-vehicle sales growth slowed from April amid government efforts to cool the economy.
Source: Bloomberg