New OMC rubber contract attracts interest<\/p>\n
SINGAPORE (Dow Jones): The Osaka Mercantile Exchange's new
\ntechnically specified rubber 20 grade futures contract has
\nattracted widespread interest and even excitement within the
\nrubber industry, but many participants will adopt a wait-and-see
\napproach when trading starts this week.<\/p>\n
They want to see if the new contract can generate the high
\nlevel of liquidity enjoyed by the Tokyo Commodity Exchange's
\nrubber futures, and whether it can lure Japan's limited number of
\nspeculators away from other futures contracts.<\/p>\n
The contract, to be launched Wednesday, is Japan's first for
\nthis grade, one that industry participants say is the most
\nactively traded in the physical rubber market.<\/p>\n
Goodyear Tire & Rubber Co., the world's largest tire maker, is
\nknown as a traditional TSR user, according to most dealers and
\nexporters. Cooper Tire & Rubber Co. and Pirelli SpA are also TSR
\nusers.<\/p>\n
Ribbed smoked sheet 3 grade is currently the sole rubber grade
\ntraded on Tocom and the OME.<\/p>\n
\"I think the TSR20 contract would work because there are more
\nconsumers of the TSR rubber,\" said Sanit Samosorn, managing
\ndirector of trade journal Rubber International and formerly an
\nadvisor to Thailand's Department of Agriculture at the Ministry
\nof Agriculture & Cooperatives.<\/p>\n
\"In the future, TSR would be the more active material,\" he
\nsaid, adding that even Thailand is cutting its RSS production in
\nfavor of TSR.<\/p>\n
Thailand, the world's largest natural rubber producer and
\nexporter, has seen its RSS production fall to 940,700 metric tons
\nin 1999 from 1.1 million tons in 1994. Its TSR production rose to
\n466,400 tons from 299,500 tons during the same period, according
\nto the London-based International Rubber Study Group.<\/p>\n
Indonesia, the second largest natural rubber producer, devotes
\nmore than 90 percent of its 1.67 million tons annual rubber
\nproduction to TSR.<\/p>\n
The new contract is \"good news for the rubber market,\" said a
\nsenior executive with a major producer of standard Indonesian
\nrubber 20 grade. SIR20 is the Indonesian grade of TSR20.<\/p>\n
As the Japanese futures markets are more active than their
\nSingaporean and Malaysian counterparts, he hoped that there will
\nbe enough speculators to activate the rubber market in general.<\/p>\n
\"There's a future for it because Japan has proven to be a good
\nplace for investors,\" he said.<\/p>\n
Apart from the Singapore Commodity Exchange which also lists a
\nTSR20 contract, RSS1 and standard Malaysian rubber 20 grade,
\nMalaysia's brand of TSR20, are listed on Malaysia's Commodity and
\nMonetary Exchange. But trading is listless.<\/p>\n
Participants also hope that OME's TSR20 contract will provide
\na better price discovery tool that either competes with or
\ncomplements Sicom.<\/p>\n
An advantage of trading in Japan is a larger degree of
\nanonymity because it has many more brokers and trading members
\nthan Sicom.<\/p>\n
\"Most people would like to trade on Osaka because it's open...
\nnobody knows what you're trying to do,\" said a dealer based in
\nSingapore.<\/p>\n
Traders say the new contract's main drawback is that it's
\ndenominated in yen, instead of dollars. The physical rubber
\nmarket is dollar-denominated.<\/p>\n
SIR20 exporters in particular will now have to hedge their
\npositions in dollar-yen as well as dollar-rupiah, they said.
\nBut exporters said they are willing to give the contract a shot
\nas long as it attracts enough liquidity.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-omc-rubber-contract-attracts-interest-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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