Broking firms set limits on trading in Noble shares

Noble Group's CEO Yusuf Alireza (above) has defended the firm's finances and says the pressure has made Noble a better company,
Noble Group's CEO Yusuf Alireza (above) has defended the firm's finances and says the pressure has made Noble a better company,PHOTO: REUTERS

Phone orders only at Phillip, CIMB wants cash upfront, UOB imposes 50% deposit

Phillip Securities, UOB-Kay Hian Holdings and CIMB Group Holdings have restricted online trading and imposed other curbs on Noble Group shares as volatility rose.

The stock posted its first gain in seven days yesterday, closing one cent higher at 42.5 cents.

Phillip Securities will limit Noble trading to phone orders through its brokers. CIMB is asking clients buying more than $200,000 of the mainboard-listed stock to pay cash upfront, according to trader Ernest Lim. At UOB, a 50 per cent cash downpayment is required for purchases above $50,000, said dealer Jimmy Ho.

Noble, the worst performer on the benchmark Straits Times Index this year, has slumped more than 60 per cent 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," said Mr Loh Hoon Sun, managing director of Phillip Securities. 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 Group 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 rose to 14.15 per cent that day, based on the latest available data from Markit Group tracked by Bloomberg.

Mr Alireza led Noble executives in a five-hour investor meeting in Singapore on the same day.

"The collapse in the Noble shares and spiking credit default swaps are getting investors really nervous," said Mr Nicholas Teo, a strategist at CMC Markets in Singapore.

"This could trigger more margin calls. That's spurring short sellers to intensify their attack," he said.

The stock's 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 promised investors on Monday to boost operating profit to more than US$2 billion (S$2.8 billion) in the next three to five years from US$1.49 billion last year.

Mr Alireza also told Bloomberg Television on Tuesday that the pressure has made Noble a better company and that the negative outlook assigned to its credit last week by Moody's Investors Service and in June by Standard & Poor's will not result in a downgrade.

"We are mindful that Moody's and S&P are expecting the company to... improve liquidity to maintain its investment grade credit ratings," Ms 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."


A version of this article appeared in the print edition of The Straits Times on August 20, 2015, with the headline 'Broking firms set limits on trading in Noble shares'. Print Edition | Subscribe