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China's ZTE shares plunge as trading resumes

June 13, 2018

Chinese telecoms equipment maker ZTE has seen its shares shed a staggering 39 percent after the resumption of trading in the company. The plunge came despite the lifting of sanctions by the US administration.

ZTE logo
Image: picture-alliance/dpa/AP/Ng Han Guan

Shares in Chinese telecoms behemoth ZTE collapsed 39 percent on the Hong Kong Stock Exchange on Wednesday as trading in the company resumed after a settlement with the United States.

Dealing in the firm was suspended in April after Washington said it had banned US companies from selling crucial hardware and software to it for seven years.

The decision came after US officials said ZTE had failed to take action against staff violating trade sanctions against Iran and North Korea. The company was fined $ 1.2 billion (€1 billion) last year for those violations.

The move in April had put the ZTE's future in doubt as it became a key issue in a wider trade spat between the US and China. Eventually a deal was reached to lift the US sanctions, making ZTE to pay a hefty penalty and requiring it to change its entire board of directors.

The Chinese firm was also told to hire outside legal compliance specialists who will report to the US Commerce Department for 10 years.

Bumpy ride ahead

Analysts viewed Wednesday's stock plunge with unease. "While the sanctions nightmare is now over, ZTE will likely have to deal with many changes," Jefferies experts Edison Lee and Timothy Chau wrote in a note. "We expect significant near-term selling pressure and a volatile stock price."

Despite the settlement with ZTE, there's been no sign the Trump administration has veered away from plans to impose billions of dollars in tariffs on Chinese imports to punish Beijing for its alleged theft of technology and know-how.

"The US agreement with ZTE is a political deal," said Kingston Securities analyst Dickie Wong. "If the US hadn't freed ZTE in this way, US companies would find it very difficult in any moves in China, including decisions on mergers and acquisitions."

ZTE: Trump's bargaining chip

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hg/jd (AFP, Reuters)

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