Trump lifeline to lift ZTE fortunes

US president instructs officials to give firm ‘a way to get back into business’

Suppliers of Chinese telecom equipment maker ZTE Corp saw their stocks surge on Monday after US President Donald Trump said that China and the United States are working to give ZTE “a way to get back into business, fast”.

MOBI Development, which gets 46 percent of its revenue from ZTE, climbed as much as 32.2 percent in Hong Kong, its biggest rise since 2013. Another supplier, Zhong Fu Tong, jumped to the 10 percent daily limit on the Shenzhen Stock Exchange. Nextronics Engineering, which earns 20 percent of its revenue from ZTE, gained as much as 8.5 percent in Taipei.

The sharp rises came shortly after Trump said in a post on Twitter on Sunday that the two nations are working together to give “massive Chinese phone company, ZTE, a way to get back into business, fast.”

The US president has instructed the US Commerce Department “to get it done”.

ZTE’s shares remain suspended on Monday. The company, which accounts for 10 percent of global telecom between China and US will focus on the standards of fifthgeneration mobile communication technology and intellectual property, which will affect the high-tech sector in the two nations,” Wang said.

At the core of the US ban on ZTE is that the Chinese company was denied access to high-end chips produced by US tech companies such as Qualcomm Inc. The incident highlights that China needs to step up the development of homegrown semiconductor industry, to reduce reliance on foreign technology.

Analysts from Essence Securities said 5G and telecom stocks will continue rebounding after the positive outcome of the ZTE incident.

“China’s efforts to promote the development of 5G networks are proceeding as scheduled. Though the ban on ZTE has led to market concern about a severe negative influence on the telecom industry, the real situation turned out better than we had expected,” Essence Securities said in a research note.

Also, according to the company, China will roll out more practical policies to support the domestic semiconductor sector. It is a long-term strategy and won’t be influenced by the short-term outcome of the ZTE incident.