SINGAPORE (Dow Jones)--Asian rubber futures continued on a downward trajectory Wednesday on the back of continued bearish sentiment, poor technical signals and concerns about fundamentals.
The benchmark August rubber contract at the Tokyo Commodity Exchange settled Y4.1 lower at Y412.4 a kilogram after falling as much as 3.7% intraday--a day after it fell 8.7%.
The imminent prospect of higher trading margins may have contributed to the selloff, said a trader at major Thai exporter, who has chosen to exit the market amid the price swings. The 50%margin increase to Y143,000 is goes into effect during Wednesday's evening session.
"Tocom may test Y400/kg very soon; the technical trend is bearish," said a trader in Thailand.
The last support level was at Y450/kg, which was breached Tuesday, resulting in follow-through selling and stop orders.
"Prices may fall to Y360/kg if they fall through Y400/kg," a Tokyo-based commodities brokerage analyst said.
Tuesday's fall on the Tocom reversed a prolonged rally that saw prices hit successive record highs from December to peak at Y535.7/kg on Feb. 18. Many participants attribute the extended rally and current sharp declines to excessive speculation.
Although there is a supply deficit forecast for 2011, traders say that this isn't being felt keenly at the moment, as high rubber prices have also resulted in intensified tapping in producing countries, and as China--the biggest consumer and importer--stays away from the international market.
Some big Japanese trading firms have been actively importing natural rubber into Japan, said a trader in Hat Yai.
Japan's natural rubber imports in January rose 21% from a year earlier to 67,041 metric tons, according to data released Wednesday by the Rubber Trade Association of Japan.
A trader in Sumatra said he is still bullish on rubber prices going ahead as "supplies are really [tight] and there is demand; it's just that buyers have been on the sidelines for some time due to the high prices and volatility."
Trade participants said the correction in natural rubber prices is overdue, as rubber futures have been overbought for far too long. Sentiment turned negative over the last two weeks due to tensions in the Middle East damping risk appetite and casting doubt on economic growth in the face of high oil prices. There was also market talk that funds were liquidating their positions on the Tocom to take part in the rallying crude-oil market.
Benchmark May Shanghai rubber settled CNY690 lower at CNY36,360 a metric ton at midday.
Benchmark October Thai rubber futures hit the THB6.9/kg limit-down and was last trading at THB150.7/kg.
Benchmark April ribbed smoke sheet 3-grade on the Singapore Commodity Exchange is untraded, but April technically specific rubber-20 was down 7 U.S. cents at 446 cents/kg at 0800 GMT.
(Source: http://online.wsj.com/article/BT-CO-20110309-702387.html)
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