ZTE shares plunge after US settlement, but market upbeat on long-term growth of chip sector

Source:Global Times Published: 2018/6/13 13:18:39

Chinese telecom giant ZTE Corp's shares on the Chinese mainland and in Hong Kong took a nose dive during the first day of trading on Wednesday after a nearly two-month suspension, following a settlement reached with US regulators that cost the firm billions of dollars but avoided a supplier ban from the US.

ZTE shares on the mainland's A-Share market plunged 10 percent to 28.18 yuan ($4.4) per share and trading was halted for the day shortly after market open. On the mainland, if a stock fell by 10 percent, it would be automatically suspended.

In Hong Kong, ZTE's shares had dropped by 39.38 percent to H$15.52 ($1.98) as of noon Beijing time.

The company announced on Tuesday night that its shares would resume trading after a 56-day suspension, which was prompted by a decision from US regulators to bar US companies from doing business with the Chinese firm, including supplying chips, due to alleged violations of US sanctions on Iran.

In a filing sent to the Hong Stock Exchange on Tuesday night, the company announced that it had reached an agreement with the US Bureau of Industry and Security (BIS) on the matter. Under the agreement, ZTE is ordered to pay fines totaling $1.4 billion and to replace its entire board of directors within a month.

ZTE said in the filing that it would assess the "full impact" of the US ban issued on April 15 in its first quarter report and disclose an update on an unspecified date.

But the market is expecting a turbulent period ahead for ZTE's shares. CITIC Securities, for example, said in a recent report that a "reasonable price" for ZTE's A shares should be 20.34 yuan per share, which is 35 percent lower than the 31.31 yuan per share price seen before the company suspended trade in April. CITIC also expects that ZTE A shares could hit the 10 percent daily limit for four days.

From Friday to Tuesday, at least 10 funds adjusted their valuations on ZTE shares, with all of them putting them at around 20 yuan to 25.05 yuan per share, according to Beijing News on Wednesday.

Still, the market is upbeat about the long-term direction of the domestic chip-making industry. CITIC said in its report that, after the ZTE saga, the Chinese government would increase support for the country's chip industry and that the sector would also focus on self-reliance related to key technologies.

CITIC said that certainty has improved for the industry and that it is giving "neutral but more optimistic" predictions. 

Posted in: COMPANIES

blog comments powered by Disqus