Rubber Futures Advance After AIG Takeover Eases Demand Concern

By Aya Takada

Sept. 17 (Bloomberg) -- Natural rubber futures advanced from a five-month low as the Federal Reserve agreed to rescue American International Group Inc., easing concern that turmoil in global financial markets may accelerate a slowdown in global economies.

Futures in Tokyo rose as much as 2.1 percent after plunging by the daily limit of 16 yen a kilogram to the lowest since April 24 yesterday. The U.S. government agreed to lend as much as $85 billion to AIG to save the nation's biggest insurer from collapse.

``The AIG news alleviated concern that more financial institutions may go bankrupt,'' Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo, said today by phone.

Rubber for February delivery added 1.2 percent to 289.9 yen a kilogram ($2,727 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Prices tumbled 5.3 percent yesterday after Lehman Brothers Holdings Inc.'s bankruptcy caused a sell-off in commodities on concern the slowdown will worsen.

Prices lost 6.2 percent this year after reaching a 28-year high at 356.9 yen on June 30, when record oil prices spurred investors to buy commodities as an inflation hedge.

Futures also climbed as Japan's currency retreated from a three-month high against the dollar, raising the appeal of yen- denominated contracts. Futures tend to move in the opposite direction of the yen as rubber trades globally in dollars.

Gains were limited after union workers in Thailand, the world's largest rubber exporter, ended a two-week strike that halted raw material shipments.

``Now we see no problems about rubber supply,'' Sugata said.

Von Bundit Co., the nation's biggest rubber exporter, said on Sept. 5 that the strike stalled about 2,000 metric tons a day of its shipments. Thailand's railway network resumed full service this week, Pairag Rojarearnngam, a State Railway of Thailand spokesman, said by phone in Bangkok yesterday.

In the cash market, Thai exporters offered RSS-3 grade rubber for November shipment at $2.92 a kilogram yesterday, down from $3.02 a week earlier, according to Takaki Shigemoto, analyst at Tokyo-based commodity broker Okachi & Co.

November-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 0.5 percent to 21,280 yuan ($3,110) a ton at 10:55 a.m. local time.

To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net