Traders skeptical about Thai intervention

Traders skeptical about Thai intervention

SINGAPORE (Reuter): The Southeast Asian rubber trade greeted
with skepticism yesterday to reports the Thai government was
again intervening in the market to prop up prices of RSS3 grade
rubber, saying the move was counterproductive.

"This is just creating a two-tier market. People believe the
price should be at 24 baht a kg while the Thai government is
coming in at 29 baht. You have to wonder how long they can
sustain it," a dealer in Singapore said.

"The price idea of buyers and sellers are so different. Buyers
look for prices of around 107.00 U.S. cents per kg while sellers
did not want to sell below 116.00 cents. How can there be any
deal?," said one Bangkok-based trader.

Another dealer said China had made inquiries in the Thai
market but turned to Indonesia as prices there were lower.

"I don't see strong buying interest unless the prices drop
from current levels," another Thai dealer said.

The Thai benchmark RSS3 was seen at around 116.00 U.S. cents a
kg for July shipment and 116.50 cents for August shipment last
Friday, up from 113.00 and 115.00 cents, respectively, from last
Wednesday.

In Malaysia, dealers said prices may rise on short-covering
ahead of the summer holidays, but the rally may be short-lived.

"The market may see some shortcovering from Europeans. They
may have to cover their positions before going for their summer
vacations," a dealer in Malaysia said.

The intervention by the Thai government has made raw materials
more expensive and this may prompt some covering among sheet
rubber grades although gains could be limited, they added.

"Other consumers are not too keen in committing themselves as
they feel Malaysian prices may dip further," a dealer said.

"Sentiment in Tokyo is not that strong and there is a surplus
of raw material in the Malaysian market."

Dealers expect some bargain hunting this week, with local
producers trying to offer lower rates to attract consumers.

On Friday, dealing houses quoted SMR CV rubber at 328-330
Malaysian cents a kg, SMR L at 305-307 cents, SMR 10 at 260-262
cents and drum latex at 226 cents.

"There could be some interest for latex rubber from local
glove manufacturers," a trader said.

Malaysia's benchmark RSS1 rubber was quoted at the close of
the market last Friday at 278.50 cents a kg against 275.50 cents
the previous week, and June SMR 20 at 264 cents against 262.50.

Indonesian traders said, however, that they expect prices of
the benchmark SIR20 rubber to drift lower this week due to
sluggish demand.

"Market sentiment is still weak," one dealer said. "Buying
interest remains thin in the local market so we expect prices to
decline further next week."

Traders said SIR20's offer prices were quoted at 47.00 U.S.
cents/lb FOB Palembang for July/August shipment, at 47.50 cents
FOB Medan, 47.25 cents FOB Padang, 47.25-50.00 cents FOB Surabaya
and 46.75 cents FOB Pontianak and Jambi.