ZTE shares soar after US lifts supplier ban

HONG KONG: Investors yesterday cheered the lifting of a US supplier ban on China’s ZTE Corp, pushing its shares up 17%, though analysts cautioned the telecommunications equipment maker still faced many challenges as it works to revive its business.

The US Commerce Department on Friday lifted a crippling ban on American firms selling parts to ZTE – imposed in relation to a US sanctions case – after the Chinese company deposited US$400 million (RM1.6 billion) in escrow as part of a settlement reached last month. The settlement also included a US$1 billion penalty paid to the US Treasury in June.

“It’s a long way back for ZTE. Not just to win back customer confidence and assure them, but also work hard to find substitutes to US suppliers such as Avnet, Qualcomm, Broadcom, etc (to reduce reliance),” said Nikhil Batra, senior research manager at consultancy IDC.

ZTE’s Hong Kong-listed stock opened up 5.5% yesterday, rising over 17% to HK$16.12 (RM8.32) by noon. That was still 37% lower than its last price in April when trading of the stock was suspended for two months following the ban.

ZTE’s Shenzhen shares jumped by their 10% daily limit early yesterday, as investors brushed off ZTE’s forecast on Friday a net loss of up to 9 billion yuan (RM5.5 billion) for the first half of 2018 due to the fine.

Jefferies analyst Edison Lee estimated ZTE had an operating loss of up to 4 billion yuan for April-June due to suspending business when the ban was imposed.

Lee said he expected ZTE to go to each of its non-Chinese telecommunications customers “and offer incentives of varying degrees to compensate for their hardship and reward their patience and loyalty”. – Reuters