ZTE shares take 42% hammering

ZTE’S SHARES plunged after it agreed to pay at least $1 billion (R13.2bn) in penalties and overhaul its management as part of a sweeping settlement agreement that allowed it to resume business after a two-month hiatus. China’s second-largest telecoms equipment maker fell 42 percent when it resumed trading in Hong Kong following a suspension in April, when the US imposed a ban on purchases of vital American technology as punishment for violating sanctions on Iran. Its Shenzhen stock slid by the daily maximum of 10 percent. This wiped about $2.7bn off ZTE’s market value yesterday. ZTE, a focal point of a US-China trade dispute, agreed to pay $1.4bn in total penalties, including a lumpsum payment of $1bn and a suspended penalty of $400 million, and replace its board. Although this averts an imminent collapse, investors remain concerned about the distraction of a management overhaul and its ability to regain credibility in global markets. Meanwhile, there’s no guarantee US lawmakers won’t come back with further sanctions. – Bloomberg JAPAN