TOCOM hits 1-week low on falling oil, stocks; China fears linger

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TOKYO (Sept 2): Benchmark Tokyo rubber futures fell 3% to a one-week low on Wednesday as investors unwound long positions taking cues from weaker regional stock markets and sliding oil prices amid persistent concerns over slowing growth in China, dealers said.

The Tokyo Commodity Exchange (TOCOM) rubber contract for February delivery finished 5.3 yen or 3% lower at 169.1 yen (US$1.41) per kg. It earlier hit a low of 167.0 yen, the lowest since Aug 25.

"Rubber took a beating after share prices in Tokyo and other Asian markets slumped in early trade and oil prices sagged," said Hiroyuki Kikukawa, general manager at Nihon Unicom Inc.

Japanese stocks fell on Wednesday, as concerns about China's cooling economy and further losses in Chinese stock markets demoralized investors, wiping out early gains.

Chinese stocks managed to bounce off from steep losses and ended Wednesday almost flat as fresh supportive measures from brokerages eased investor fears that Beijing may be intensifying a crackdown on illegal margin financing.

Oil prices fell 2% in Asian trade on Wednesday, as a stronger-than-expected build in U.S. crude oil stocks and weaker U.S. manufacturing data fuelled a rout in prices that started in the previous session.

"But I would say most of trade was position adjustment ahead of a long weekend in China," Kikukawa said.

Financial markets in China will be closed on Thursday and Friday due to a national holiday.

The TOCOM benchmark, which set the tone for tyre rubber prices in Southeast Asia, has been weighed down by worries over slowing demand in the world's top buyer China, and has lost more than 30% since hitting a 16-month high in early June.

"The market is clearly oversold and it could bounce back to around 190 yen in the short run. But that can happen only if investors see signs that the market is bottoming out," Kikukawa said.

The most-active rubber contract on the Shanghai futures exchange for January delivery fell 200 yuan to finish at 11,220 yuan (US$1,763.24) per tonne.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.3% from last Friday, the exchange said on Wednesday.

The front-month rubber contract on Singapore's SICOM exchange for October delivery last traded at 122.5 U.S. cents per kg, down 2.7 cent.

(US$1 = 120.0500 yen)
(US$1 = 6.3633 Chinese yuan)