Noble Group’s Kurtosis Awakening Moment For The Commodity Markets
Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market.
Noble Group is Asia’s largest commodities trader.
According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions worth of fair value gains on asset valuation over the last 5 years.
Just prior their Q2 earnings release, we published the reasons outlining why we believe that the trader is an accounting hocus-pocus.
Since we are exactly one week after their Q2 results, in theory Standard and Poor’s had time to do their homework.
We expect a big announcement of S&P on Noble Group later this week.
UK insurers (who have also a foot in the cargo insurance market) have dumped Noble Group bonds overnight.
The S&P downgrade was leaked or they have just anticipated it.
Bonds maturing 2020 now trading in mid 80’s; private bank clients waking up to risks? Company no longer has access to capital markets.
6 months after repeated assurances from Alireza that the financial accounting inquiry’s findings would not trigger a scramble for capital…
... 5 yrs CDS paper quoted at 743 bps, stands at the highest level since 2009, 100bps bid-ask
Energy credit analysts wonder where Noble Group’s financing will come from going forward with the downgrades.
The trader will lose its access to their counter parties because of stricter limitations to deal with them now.
Below is an excellent interview from GMT Research founder Gillem Tulloch made on Bloomberg Television.
Trading firms should be the experts at managing market risks; it’s at the core of our job to stay in business but when a major trader is on the brink of, and the market is pricing an event, the commodity market and market risk become extremely fungible.