Rubber slumped after China raised borrowing costs for the first time since 2007, boosting speculation demand from the world’s largest user may weaken. The most-active contract on the Tokyo Commodity Exchange lost as much as 3.1 percent to 328 yen per kilogram ($4,031 a metric ton) before trading at 330.3 yen at 9:51 a.m. The price reached 343 yen on Oct. 15, the highest level since July 2008. China’s central bank yesterday raised the benchmark one- year lending rate to 5.56 percent from 5.31 percent and the deposit rate to 2.5 percent from 2.25 percent as policy makers attempt to curb lending and prevent an asset-price bubble. The move comes days before Group of 20 officials gather in South Korea to discuss the global economy amid disagreements over whether the yuan is undervalued. “The action may curb expansion in Chinese demand for raw materials,” Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., said today by phone. “The news also triggered sales as the market was ripe for profit-taking after a rally.” Before today, rubber futures in Tokyo had gained 8.7 percent this month, heading for the best monthly performance since December 2009. Asian stocks extended a global sell-off as China’s rate increase raised concern that the economic recovery may slow. Thirteen of the 19 economists surveyed by Bloomberg News last month forecast that lending rates would stay unchanged this year. Central bank Governor Zhou Xiaochuan on Oct. 8 signaled that bank reserve requirements and bill sales were sufficient tools to control inflation. Taken by Surprise “The Chinese rate hike took the market by surprise,” said David Taylor, a market analyst at CMC Markets Ltd. Crude oil traded near a three-week low after tumbling by the most in eight months yesterday on concern that higher Chinese rates will crimp demand in the world’s biggest energy user. Cheaper oil reduces the appeal of natural rubber as an alternative to synthetic products made from petroleum. The November contract was at $79.75 a barrel at 10:23 a.m. Tokyo time. Yesterday it tumbled 4.3 percent to $79.49, the biggest loss since Feb. 4. In the cash market, RSS-3 grade rubber for shipment in November gained 0.3 percent to 120.05 baht ($4.02) a kilogram yesterday, boosted by sustained demand from China to replenish stockpiles, while supply remains low amid continued heavy rains, according to the Rubber Research Institute of Thailand. A severe drought in Yunnan at the beginning of this year and torrential rains this month in Hainan, the top two producing areas in China, will reduce domestic rubber output, according to Guo Cheng, an analyst at Yongan Futures Co. Natural-rubber imports by China, the world’s largest user, jumped 19 percent from a month earlier to 190,000 tons in September as the nation’s passenger-car sales to dealerships quickened from August on additional incentives for buyers. Wholesale deliveries of passenger cars rose 19.3 percent to 1.21 million, accelerating from 18.7 percent in August, the China Association of Automobile Manufacturers said Oct. 12. Dealers stepped up discounts in China, the world’s largest auto market, after passenger-vehicle sales growth slowed from April amid government efforts to cool the economy. To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net; Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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