CPO price declined RM 140 in the opening session for nearby contract month and closed at 2780 for the morning session.
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HONG KONG, Aug 5 (Reuters) - Fear of a global slowdown has caught up with high-flying commodities stocks after a sharp decline in oil and metal prices, more gloom in the U.S. economy and a glimmer of deceleration in China.
“You’ve got an economic slowdown and markets are slowly coming to terms with it. Some of the speculation that was looking for safe harbour in commodities is starting to unwind,” said Mark Konyn, chief executive of Allianz SE’s RCM Asia Pacific arm, which manages about $15 billion.
“Our longer-term view is still for a structural uptrend, because we don’t see the demand easing at all and we still see some supply side constraints.”
Investors have relied for months on China’s boom supporting prices for oil, copper, aluminium and steel, even as the U.S. economy has suffered a housing crisis that has taken it to the brink of recession. Richer households in China and India have also contributed to a sharp rise in food prices.
But copper hit a six-month low and other industrial metal prices declined on Monday as rising inventories pointed to lower demand, while U.S. soybean futures hit their lowest in three months, with ideal crop weather boosting supply just as Chinese buying slowed down ahead of the Olympics in Beijing.
“At the moment, people are taking the view that the glass is half-empty, rather than the glass is half-full,” said Greg Goodsell, equity strategist at ABN AMRO in Sydney.
“Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth.”
Data last Friday showed China’s manufacturing sector contracted in July for the first time since an official survey began in 2005, although analysts said the slowdown was due at least in part to the shutdown of polluting industries ahead of the Olympics, which start on Friday.
“China’s economic growth has shown a drastic deterioration lately, which is much faster and worse than many people’s expectations,” Citigroup Asia strategist Lan Xue said in a note to clients.
The Reuters-Jefferies CRB index which tracks a basket of 19 commodities, fell 3 percent on Monday, wiping out all the gains made since early May.
The UK mining index shed 3.5 percent in London on Monday and Australia’s resources giants followed suit on Tuesday, with BHP Billiton and Rio Tinto down 5.6 percent and 4.8 percent, respectively.
Japan’s iron and steel index was down 3.0 percent and the MSCI ACWI Materials Index was 1.1 percent lower.
“After several years where the focus has been mainly on tight metal supplies, it seems the markets are finally focusing more on the implications of rapidly weakening demand,” said MF Global analyst Edward Meir.
The slide in U.S. crude oil which was trading at $120.65 in early Asian trade on Tuesday, also helped undermine U.S. natural gas futures which fell 8 percent on Monday.
Pressured by weak U.S. demand, oil prices have tumbled nearly 20 percent since hitting a record high of $147.27 a barrel on July 11. But oil is still up about 25 percent so far this year.
Australian oil and gas producer Woodside Petroleum was 5.4 percent lower on Tuesday, after a 4.9 percent fall in S&P Energy index.
China’s top oil producers PetroChina and CNOOC were down 2.5 percent and 4.5 percent, while refiner Sinopec gained 0.6 percent as the cost of crude oil fell.
“There is speculation that the commodity sector will continue to slip over the next few weeks,” said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Inc.
“Many who have enjoyed great gains in this sector are buying puts as a protective measure.”