Hot stock update: Noble dives deeper, risks being booted out of the blue-chip STI

NOBLE Group continues to see its shares plummet in noon trade on Friday, fuelling speculation that the commodities group could be dropped from the blue-chip Straits Times Index come the next FTSE ST Index Series review in September.

At 2:43pm, Noble was the most actively traded stock in Singapore, with a staggering 193 million shares changing hands. The stock was trading around S$0.44, down S$0.08, or 15 per cent, as it heads for its lowest close since November 2008.

Compared to mid-February when Iceberg Research published criticism of the firm's accounting, Noble has since lost more than 60 per cent of its market value despite refuting the allegations.

Ranked 37th in terms of market value at the close of Thursday, Noble's fall on Friday could see it slip further in ranking and risk deletion from the STI.

"A company will be inserted into the STI at quarterly review if it rises to 20th position or above when ranked by full market capitalization; will be deleted if it falls to 41st position or below," an analyst told The Business Times.

The FTSE ST Index Series has a full review in every March and September, when a liquidity screen is also conducted. Depending on the latter, Noble might just be able to stay on the index, another analyst noted.

The latest bashing came a day after the Singapore Exchange asked the commodities group to explain the trading in its shares after they fell by as much as 12 per cent. The exchange warned investors to exercise care when trading the shares, noting at the same time that the stock has seen three instances of "unusual trading activities" in the past six months.

"Some people may be spooked by the 'Trade With Caution' notice," said Carey Wong, an analyst with Oversea-Chinese Banking Corp. There is also negative sentiment about commodity stocks, he said.

The recent plunge in Noble's share price was triggered by concerns that Noble's excessive shares buyback might impact its credit rating. According to Bloomberg, Noble has used S$131 million on its share buyback recently.

Noble's bonds have also weakened and the spread on its credit default swaps has widened as markets are worried about any deterioration in the company's credit rating.