Rubber rose to a record, reversing earlier losses, as China’s stocks increased after the nation’s central bank raised interest rates, easing concern higher borrowing costs may curb Chinese economic expansion. The June-delivery contract rallied as much as 0.7 percent to 419.3 yen per kilogram ($5,055 a metric ton) on the Tokyo Commodity Exchange before trading at 419.2 yen at 12:24 p.m. local time. Earlier the futures dropped as much as 1.9 percent to 408.9 yen on concern higher rates may weaken demand from China, the largest consumer of the commodity used in tires. China’s stocks advanced for the first time in four days, led by financial companies and commodity producers. The central bank said on Dec. 25 it would raise its benchmark one-year lending rate by 25 basis points to 5.81 percent, and the one- year deposit rate by the same amount to 2.75 percent. “Rubber futures recovered as Chinese markets shrugged off the rate increase,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Gradual gains in interest rates are unlikely to stall China’s economic growth.” May-delivery rubber in Shanghai advanced as much as 1.3 percent to 37,800 yuan ($5,703) a ton before trading at 37,325 yuan at 11:14 a.m. local time. The contract climbed to a record 38,920 yuan on Nov. 11. Futures also drew support from expectations that a supply shortage may worsen early next year as the low-production period starts around February in Thailand, the largest exporter. Thai Prices The cash rubber price in Thailand climbed 0.3 percent to a record 149.55 baht per kilogram today, boosted by limited supply from the country’s southern provinces amid strong demand for tires, according to the Rubber Research Institute of Thailand. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 0.9 percent to 2,860.91 at 11:17 a.m., led by banks and commodity producers. The Shanghai Composite became the worst performer among major Asian benchmarks this year as the central bank ordered lenders to park more money as reserve six times this year and cut last year’s record new lending growth to combat inflation. Chinese Premier Wen Jiabao is seeking to slow gains in property values and consumer prices that are making it harder for families to buy homes and pay for food. China reported an inflation rate of 5.1 percent for November, the highest in 28 months. Exports last month reached a record $153.3 billion and the trade surplus exceeded $20 billion for the fifth time in sixth months, indicating a recovery in international trade from the global financial crisis. To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net; To contact the editor responsible for this story: Richard Dobson at Rdobson4@bloomberg.net

Source