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Hong Kong Stock Exchange

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

PUBLISHED : Thursday, 12 July, 2018, 7:05pm
UPDATED : Thursday, 12 July, 2018, 7:26pm

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.”

ZTE’s shares soared 25 per cent in Hong Kong to end at HK$13.94, and its Shenzhen-listed shares rose by its daily limit of 10 per cent to 13.31 yuan.

Among other main stock indices, the Hang Seng China Enterprises Index gained 0.9 per cent to 10,752.86. On the Shenzhen market, the Shenzhen Component Index, the Shenzhen Composite Index, and the ChiNext Price index finished higher by 2.8 per cent, 2.7 per cent, and 3.3 per cent respectively.

Among telecoms, Qingdao Topscomm Communication, Shanghai Fortune Techgroup Share, T&S Communications, Jiangsu Zhongtian Technologies, and Sunwave Communications all soared by their daily maximum 10 per cent.

Electronic component makers also jumped, as Fujian Start Group, Zhejiang Tony Electronic, and Suzhou Chunqiu Electronic Tech all finished up 10 per cent.

In Hong Kong, smartphone component manufacturer Sunny Optical Technology leapt 6.7 per cent to HK$151.50, to become the best performer among blue-chip stocks.

Chinese smartphone maker Xiaomi rose 1.4 per cent to HK$19.26.

Among other top gainers, real estate developers Country Garden and China Resources Land rose 3.3 per cent and 2.5 per cent to HK$13.24 and HK$26.55 respectively.

Meanwhile, China Mobile dropped 1.1 per cent to HK$69.70 after sources said China Tower, the country’s telecoms tower operator in which China Mobile holds the biggest stake, may reduce its fundraising size from the US$10 billion initially sought in its upcoming IPO in Hong Kong.

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