ZTE leaves trade war woes behind as stock makes a strong comeback

Shares of ZTE, which dropped 70 per cent as it got caught up in the US-China trade war, are back in favour with traders.

China’s second-largest telecoms gear maker has jumped 45 per cent since the second quarter on the Shenzhen exchange, making it the best-performing stock on the CSI 300 Index of big caps. Its Hong Kong-traded stock has advanced 22 per cent in that period.

The turnaround in ZTE’s share performance, which tumbled to a near four-year low last month, came after the Trump Administration lifted a ban on selling key American technology components to the Chinese company. The latest catalyst fuelling the rally is China’s progress in building its fifth-generation wireless network, allocating spectrum bands to major mobile operators. The stock was also added to MSCI’s emerging-markets index in the latest review this month.

“The worst had already been priced in ZTE’s stock and many investors had anticipated the company either to collapse or to be acquired,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “The decline had been too much, so the comeback is very strong.”

ZTE had a traumatic month in July, slumping by the 10 per cent daily limit for eight consecutive days and wiping out 69 billion yuan (US$10.1 billion) in market value, as the US embargo had virtually left it in a state of being out of business.