IRCo – Rubber Market Watch: 18 – 22 March 2013

By Yium Tavarolit

The Global Economy Goes Mad

The Movements of Global Stocks, Finance and Energy

Asian stock markets mostly fell on Friday, following losses in Europe after the European Central Bank (ECB) told Cyprus it would cut off funding to the banks if it did not agree on a new bailout deal soon. Japan’s Nikkei 225 index tumbled to a lower closure at 12,338.53 and Hong Kong’s Hang Seng index also closed lower at 22,115.3053 on the same day. Australia’s ASX200 index fell to 4,967.26. Nonetheless, the Shanghai Composite index continued its rise throughout the week and closed higher at 2,328.28 on Friday as Chinese data showing manufacturing activity picked up in March.

European stock markets were rattled throughout the week by the news that Cyprus was planning to tax depositors as part of a controversial bailing, and it has time until Monday, 25 March, to confirm that it plans to tax depositors to 10% as part of a deal to qualify for a EU/IMF $13 billion bailout. Europe’s STOXX 600 index ended down at 294.04 on Friday. France’s CAC 40 index, fell 0.1% to 3,770.29, ending the week 1.9% lower, while Germany’s DAX 30 index lost 0.3% to 7,911.35, off 1.6% on the week. The U.K.’s FTSE 100 index gained 0.1% to 6,392.76, although closing out the week 1.5% lower.

Wall Street provided a positive lead after the U.S. Federal Reserve (Fed) kept its high stimulus measures in place and said the economy has shown signs of picking up even though the turmoil in Cyprus continued to damp sentiment. The Dow Jones Industrial Average advanced to 14,512.03on Friday. In the meantime, the Standard & Poor’s 500-stock index added 11.09 points, or 0.7%, to 1,556.89, and the Nasdaq Composite index rose 22.40 points, or 0.7%, to 3,245.00.

The dollar weakened against the euro along the week as investors held out hope that officials inCyprus will reach an agreement to secure a bailout from the European Union before a Monday deadline. In contrast, the Japanese yen strengthened against the dollar along the week as investors viewed that Governor Haruhiko Kuroda’s first press conference on Thursday didn’t lay out any specific new policies that would undermine the yen, prompting many hedge funds to take profits on their bets against the Japanese currency.

The euro was at $1.2989 on Friday from $1.2897 late Thursday, according to EBS via CQG. The dollar was at 95.95 yen from Y94.50.In the meantime, The Thai baht and Malaysian Ringgit strengthened against the dollar at THB29.25 and at MYR3.1110 per dollar on Friday, but the Indonesian Rupiah weakened against the dollar at IDR9740 per dollar.

Crude oil futures on the New York Mercantile Exchange (Nymex) was rangebound during the week supported by firm Wall Street amid investors’ concern about a Cyprus bank bailout. Light, sweet crude oil for May delivery on the New York Mercantile Exchange settled $1.26 higher at $93.71 a barrel on Friday, According Dow Jones Newswires.

Rubber Markets

Market players’ perception towards rubber futures was changed after Shanghai Stock Composite index rebounded from its consecutive fall a week earlier and rose steadily to end higher at 2,328.28 on Friday as Chinese data showed that the China Manufacturing Purchasing Managers index rose to 51.7 in March, from 50.4 in February. That resulted in an improvement in the most active rubber contract on the Shanghai futures exchange for September delivery from Monday to Thursday before it would settled slightly lower at 22,830 yuan/ton (around $3,676.33 per ton).

Tokyo rubber futures remained volatile and were weighed down by investors’ concerns about uncertainties of the Cyprus bank bailout and a stronger yen against the dollar early in the week that caused its benchmark rubber contract for August delivery to finish lower at 278.5 yen/kg (293 US cents/kg) on Friday.

However, a message from the International Tripartite Rubber Council: ITRC on Tuesday saying that it would evaluate its six-month withholding of 300,000 tons of natural rubber (NR) at a meeting early next month in Phuket, Thailand before making any further moves and a confirmation by the Fed to continue aggressive easing measures in the form of $85 billion a month on Wednesday convinced market players to hold more long positions from Tuesday to Thursday, before some of them would liquidate their long positions for profit-taking on Friday.

Firm global stock markets and energy prices during the week also lent support to an improvement in rubber futures and physical rubber markets in Asia to a certain extent. The table below shows that IRCo’s DCP and NR prices on the other markets on Friday recovered from their deep falls on an earlier Friday.

Description	22-Mar-13	15-Mar-13	Change	Unit
IRCo’s DCP	282.44	282.38	0.06	US cents/kg
TOCOM/RSS3 *
– Mar.	263.90	268.50	-4.60	Yen/kg
– Aug.	278.50	282.90	-4.40	Yen/kg
– Volume	7,892	11,310	-3,418	Lots
SHFE/RSS3 **	22,830	22,950	-120	Yuan/ton
AFET/RSS3
– Apr.	86.20	87.20	-1.00	THB/kg
– Oct.	86.35	87.90	-1.55	THB/kg
– Volume	98	275	-177	Lots
SMR20 ***	283.00	286.00	-3.00	US cents/kg
SIR20 ***	276.00	276.00	–	US cents/kg
RRIT
– RSS3	86.45	86.55	-0.10	THB/kg
– STR20	81.50	82.35	-0.85	THB/kg
– USS3	77.90	78.89	-0.99	THB/kg
– Conc. Latex	61.05	61.15	-0.10	THB/kg
– Field Latex	77.00	77.00	–	THB/kg
Notes: * the day sessions the most active month is Sep. * offers, fob prices for Apr. & May deliveries

IRCo’s technical MACD and Signal Line showed some improvements but still stayed in negative territory on Friday whereas IRCo’s technical RSI rose from 22.19% on an earlier Friday to 38.71% on Friday.

The improvements in IRCo’s three technical indicators will be confirmed if rubber market sentiments and fundamentals could further improve in the coming weeks under the conditions of a success in the Cyprus bank bailout, firm global stock markets, a stable yen against the dollar, and tight NR supplies in major producing countries.

At this juncture, we can say that downside risk is unlikely for the rubber market.