(Yicai Global) Dec. 28 -- China's state-backed Sinopec is investigating losses at its trading subsidiary after the suspension of the executives behind the deficit sent its share price tumbling.
China International United Petroleum & Chemicals, or Unipec, suspended General Manager Chen Bo and Party Secretary Zhan Qi for "work reasons," Sinopec said in a statement yesterday. Deputy General Manager Chen Gang is now running the arm, which is China's largest cross-border trading firm.
Sinopec's [SHA:600028] share price fell 6.4 percent to CNY5.25 (76 US cents) yesterday, after sources leaked that Unipec had made losses forward hedging on crude oil.
Han Xiaoping, chief information officer of China Energy Net, said investors were overreacting. Sinopec's main market is China, and it is huge, he added, saying the losses will not be fatal however large they are.
Some have proposed that Zhan and Chen lost the cash speculating in oil futures, something that the State-owned Assets Supervision and Administration Commission, which runs central state-backed firms, forbids such companies from doing. The enterprises are only permitted to forward hedge, which Sinopec does with crude futures to balance the book when selling commodities.
Suggestions that the losses were a result of the executives speculating in futures are wrong, an insider told Shanghai Securities News today.
Editor: James Boynton