Benchmark Tokyo rubber futures rebounded on Tuesday, shrugging off weak factory activity data in top buyer China and higher rubber inventories in Japan, as stronger oil prices and Shanghai equities helped boost investor risk appetite.
The Tokyo Commodity Exchange (TOCOM) rubber contract for August delivery <0#2JRU:> finished 1.5 yen, or 1%, higher at 156.6 yen (US$1.39) per kg.
The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, have been traded in a tight range of 150–158 yen since mid-January amid nagging concerns about China's weakening demand and volatile oil prices.
"The TOCOM prices were supported by a climb in oil and share prices in China and Japan, offsetting bearish mood coming from softer China data," said Toshitaka Tazawa, analyst at Fujitomi Co.
Oil prices rose on Tuesday as falling US and OPEC production tightened an oversupplied market and outweighed a slump in China's manufacturing sector that stirred fears of slowing demand growth.
Asian shares extended gains on Tuesday, boosted by China's monetary easing and downbeat manufacturing and service surveys that raised hopes of additional stimulus measures.
The Shanghai Composite Index gained 1.7% while the Japan's Nikkei share average rose 0.4%.
Activity in China's manufacturing sector shrank more sharply than expected in February, surveys showed on Tuesday, prompting smaller companies to shed workers at the fastest pace in seven years and suggesting Beijing will have to ramp up stimulus to avoid a deeper economic slowdown.
Crude rubber inventories at Japanese ports stood at 14,553 tonnes as of Feb 20, up 4.8% from the last inventory date, data from the Rubber Trade Association of Japan showed on Tuesday.
Asia's top rubber producers are cutting exports by 615,000 tonnes for six months from this month, in a move to to lift prices that have tumbled amid excess supply to their lowest since the global financial crisis.
Rubber prices will likely be more sensitive to external factors such as oil prices and stock movements than fundamentals, Fujitomi's Tazawa said.
The most-active rubber contract on the Shanghai futures exchange for May delivery was up 20 yuan to finish at 10,355 yuan (US$1,583.58) per tonne.
The front-month rubber contract on Singapore's SICOM exchange for April delivery last traded at 114.5 US cents per kg, up 1.1 US cent.
