Sinotrans to stop cargo custodian and collateral management

Sinotrans Group has been looking to withdraw from cargo custodian and collateral management services in its warehousing operations, chairman Zhao Huxiang told the South China Morning Post yesterday, a day after stocks of the group's Hong Kong-listed logistics unit Sinotrans Ltd were sent tumbling by allegations of fraud.

"We have been conducting assessments of these businesses for two years and are on the verge of exiting. There's just too much risk associated with these businesses," Zhao said on the sidelines of the World Shipping (China) Summit.

Sinotrans shares were suspended from trading on Wednesday after falling up to 27.9 per cent in the morning after the mainland media reported that subsidiaries of its parent company, Sinotrans & CSC, were involved in fraudulent inventory management.

The China Business News reported the person in charge of the Guangxi and Liuzhou subsidiaries of Sinotrans' parent company had been detained by police for involvement in multiple pledging of the same inventory as collateral for bank loans.

The report also said Sinotrans & CSC subsidiaries were involved in inventory management problems, such as fraudulent accounts and missing inventories, and that the value of such "risky" inventories pledged as collateral and managed by the subsidiaries had exceeded 10 billion yuan (HK$12.67 billion).

Zhao dismissed the report. "It was not accurate and not responsible journalism. I'm aware of the stock tumble. But what has been reported has no impact on the business and profitability of Sinotrans Ltd," said Zhao, who is also the head of Sinotrans & CSC Group.