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Phillip, CIMB, UOB impose curbs on Noble Group share trading
[SINGAPORE] Phillip Securities, UOB-Kay Hian Holdings and CIMB Group Holdings restricted online trading and imposed other curbs on Noble Group Ltd. shares as volatility rose. The stock posted its first gain in seven days.
Phillip Securities will limit Noble trading to phone orders through its brokers. CIMB is asking clients buying more than S$200,000 of the Singapore-traded stock to pay cash upfront, according to trader Ernest Lim. At UOB, a 50 per cent cash down-payment is required for purchases above S$50,000, dealer Jimmy Ho said.
Noble, the worst-performer on the benchmark Straits Times Index this year, has slumped more than 60 percent since February when its accounting methods first came under attack by a group called Iceberg Research. Since then, profit has been hurt by the slide in global commodity markets, the company's credit outlook has been cut to negative and its bonds are trading below prices typical of an investment grade issuer.
"This is part of our normal risk management process," Loh Hoon Sun, managing director of Phillip Securities, said in a phone interview, adding that its brokers "will look at each client's background to make sure they don't over trade on this speculative stock."
The restrictions imposed by some of Singapore's biggest brokerages come as short interest on Noble shares surged to a new high on Monday even as Chief Executive Officer Yusuf Alireza defended the finances of Asia's biggest commodity trader to investors.
Short interest as a percentage of Noble's outstanding shares climbed to 14.15 percent on Monday, based on the latest available data from Markit Group Ltd. tracked by Bloomberg. Alireza led Noble executives in a five-hour investor meeting in Singapore the same day.
"The collapse in the Noble shares and spiking credit default swaps are getting investors really nervous," Nicholas Teo, a strategist at CMC Markets in Singapore, said by phone. "This could trigger more margin calls. That's spurring short sellers to intensify their attack."
The stock rose 2.4 per cent to 42.5 Singapore cents at the close, paring gains of as much as 9.6 percent. Its 30-day trading volatility surged to the highest since November 2011, according to data compiled by Bloomberg. In July, the Singapore exchange warned investors to trade the shares with caution when the stock posted its biggest monthly rout in 16 years.
Noble pledged to investors Monday to boost operating profit to more than S$2 billion in the next three to five years from S$1.49 billion in 2014. Mr Alireza also said in an interview with Bloomberg Television on Tuesday that the pressure has made Noble a better company, and the negative outlook assigned to its credit last week by Moody's Investors Service and in June by Standard & Poor's won't result in a downgrade.
"We are mindful that Moody's and S&P are expecting the company to delever and improve liquidity to maintain its investment grade credit ratings," Mary Ellen Olson, a Hong Kong-based credit analyst at Credit Agricole CIB, wrote in a note.
"Any move to increase debt or issue secured debt would be credit negative in our view."