Telecoms stoke rally in Hong Kong and China fuelled by optimism ZTE has reached deal with the US government
ZTE shares rocket 25pc in Hong Kong and were limit-up 10pc in Shenzhen after the US Commerce Department said it had signed an escrow agreement that will allow the company to resume business with American component suppliers once a US$400 million fine is settled; China Mobile shares sink 1.1pc
Chinese telecoms and smartphone makers surged on Thursday, powering a rally in the overall stock market, with sanction-hit ZTE jumping 25 per cent after reaching a deal with the US government that clears the way to resume business with American suppliers.
The Shanghai Composite Index advanced 2.2 per cent, or 59.89 points, to close at 2,837.66, paring a 1.8 per cent drop on Wednesday.
Hong Kong’s benchmark Hang Seng Index rose 0.6 per cent, or 169.14 points, to 28,480.83, halting two days of losses.
ZTE, the world’s fourth largest telecom network equipment maker and the fourth biggest smartphone vendor in the US, rebounded sharply following recent heavy losses after the US announced it would lift the ban on US companies from selling components to ZTE as part of a deal that requires the company to put US$400 million in an escrow account.
“The market rebounded today, as investors realised they may have overreacted to the US’s previous announcement of an additional US$200 billion in tariffs, as there may still be some wiggle room between now and the date when these tariffs actually take effect,” said Alvin Cheung, associate director for Prudential Brokerage.
But he remained cautious about ZTE’s outlook.
“Whether ZTE can recover its full operation is still to be seen. There are just too many uncertainties at the moment.”
