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Noble Group rises on buyback and China shareholder's support

Wednesday, June 24, 2015 - 11:35
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Noble Group Ltd rose after the company bought more stock and its second-largest shareholder, China's sovereign wealth fund, voiced support for the company for the first time in the wake of criticism of its accounting practices.

[SINGAPORE] Noble Group Ltd rose after the company bought more stock and its second-largest shareholder, China's sovereign wealth fund, voiced support for the company for the first time in the wake of criticism of its accounting practices.

"As a major shareholder of Noble Group, we will continue to support its business," Xie Ping, executive vice president of China Investment Corp, said in a Noble Group statement announcing the appointment of a new director.

Noble, Asia's largest commodity trader, rose as much as 4.3 per cent and at 10:50 am local time was up 2.9 per cent to 71.5 Singapore cents, outpacing Singapore's benchmark index.

As of the close Tuesday, Noble was down 42 per cent since a group calling itself Iceberg Research published its first critical report in February. Noble has rejected its claims.

"Definitely, the street will treat this quite positively as it's a show of support from a key shareholder," Carey Wong, an analyst with OCBC Investment Research, said by phone.

Now, the question is whether the fund will buy more of Noble's stock. "We want to see the money, as the saying goes, where their mouth is," Mr Wong said.

Noble purchased another 14 million shares Tuesday, according to a separate statement, taking its buyback to almost 120 million shares, or 1.8 per cent of total equity.

The buybacks have helped support shares in the face of a jump in bets that the stock will fall. Short interest on Noble's equity was up 10-fold this year, according to a report earlier this month from Markit Group Ltd.

They buybacks have also drained liquidity from the stock, which Wong said may put off some investors.

"It may reach a point where liquidity is tight," said Mr Wong, who rates Noble a Hold. "It may not be good news for people looking for liquidity, so it's a Catch-22 situation." CIC originally paid S$2.1137 per Noble share when the fund bought a 14.9 per cent stake in 2009. It sold down its shares last year and retains a 9.5 per cent interest, according to data compiled by Bloomberg. Noble's biggest shareholder is founder and Chairman Richard Elman.

An e-mail sent to CIC's Beijing-based press office seeking comment didn't get an immediate response.

Noble said today it has appointed Yu Xubo, the president of China's state-run food trader Cofco Ltd, as a non-executive director.

BLOOMBERG