China fund managers slash ZTE valuation after US sanctions

Chinese funds have slashed valuations of ZTE Corp after the US banned American companies from selling components to the telecoms equipment maker for seven years, a move ZTE said threatens its survival.

The US action last week was sparked by ZTE’s violation of an agreement reached after it was caught illegally shipping US goods to Iran. US companies are estimated to provide 25 percent to 30 percent of the components used in ZTE’s equipment.

Chinese mutual fund managers cut the value of the stock in their portfolios by 20 percent to 30 percent in announcements over the weekend, a blow to ZTE, which suspended trading of its shares in the Chinese mainland and Hong Kong on April 17.

About 40 Chinese mutual funds have adjusted the valuation of ZTE in their portfolios since the suspensions. In the latest batch, five fund managers revalued the stock on Saturday.

Huatai-Pine-Bridege and GTJA Allianz cut their valuation of ZTE’s mainland shares to 25.05 yuan ($3.97), 20 percent less than its last trading price. JT Asset Management, which is the most pessimistic, slashed the valuation to about 30 percent below ZTE’s last close of 31.31 yuan.

Several funds with exposure to ZTE’s Hong Kong shares, including HuaAn Fund and Harvest Fund, cut valuations to about 20 percent below the last trading price of HK$25.60 ($3.26).

ZTE, which had a market capitalization of about $20 billion before trading in its shares was suspended, did not respond to a request for comment

on Monday.