More brokers restrict ISR Capital trading
Local brokerages Phillip Securities and OCBC Securities have
joined other houses in restricting trades made on investment firm ISR Capital,
as a massive rally in the counter looks at risk of reversing.
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Cai Haoxiang
22 September 2016
Local brokerages Phillip Securities and OCBC Securities have joined other houses in restricting trades made on investment firm ISR Capital, as a massive rally in the counter looks at risk of reversing.
On Tuesday, ISR had hit an intraday high of S$0.285 and technical indicators suggested that the stock was severely overbought. That evening, Phillip Securities said that Internet buys in the counter will be prohibited "to control credit exposure".
On Wednesday, the counter fell three cents to S$0.225, or 11.8 per cent, on almost 24 million shares traded. This gave the stock a market value of S$350 million. In the evening, OCBC Securities banned Internet buying, adding that investors had to deposit cash for additional orders above S$25,000.
Checks with other brokerages revealed that Lim & Tan Securities and UOB Kay Hian have put the stock on their restricted lists for some time, while Maybank Kim Eng and DBS Vickers are among brokers who do not have such restrictions.
Trading restrictions on stocks can include Internet trading prohibitions, limits on contra trading, margin requirements, and dollar limits on buy and sell orders.
A broker, who declined to be named, told The Business Times that it is quite common for brokerages to impose these restrictions to control risk exposures to certain counters.
Some bigger clients may be given more leeway, but requests have to be approved by credit officers, he said.
Currently, brokers bear credit risks for clients as cash transfers to settle a trade only occur three days after a trade is made.
However, the Singapore Exchange (SGX) is reportedly moving towards a shorter settlement period. There will also be a 5 per cent collateral requirement for all securities trading to be implemented in 2018.
Mainboard-listed ISR was formerly known as Asiasons WFG Financial, and was linked to the 2013 penny stock crash. This year, it traded at as low as S$0.003.
The counter spiked in May after some highly dilutive convertible bonds were converted into shares. Within a week, ISR rose around 20 times to above S$0.10 a share.
In June, the firm said it was buying a 19.9 per cent shareholding in Tantalum Holding (Mauritius) and issuing about 133 million new shares at S$0.10 each to the vendor, REO Magnetic, to fund the S$13.3 million purchase. Tantalum indirectly holds a permit to explore a concession in Madagascar to explore and develop a concession with rare earth elements.
In July, ISR said it will acquire REO's other 40.1 per cent stake in Tantalum for S$26.7 million.
Soon after, ISR said an independent valuation of the concession's assets gave a value of US$1.08 billion.
On Sept 5, ISR said it will issue 141.2 million new shares to four investors - three individuals and a private equity firm - at S$0.085 a share. This was to raise S$11.6 million of working capital, mostly for the Tantalum acquisition.
Last week, shares rose 50 per cent. This Monday, shares rose another 70 per cent to close at S$0.26.
In response to a SGX query, ISR said that negotiations on potentially managing and financing the Madagascar rare earth project are at a preliminary stage.