China’s two largest surveillance camera makers take a beating from US ban

Investors on Friday dumped shares of the world’s top two security camera makers – Hangzhou Hikvision Digital Technology and Zhejian Dahua Technology – after they warned that a move to ban the use of Chinese made surveillance equipment by the US federal government could have wider ramifications on their business.

The US Senate passed the 2019 National Defense Authorization Act on Wednesday, under which the US government will be banned from buying Chinese-made surveillance equipment from several Chinese firms. The US president is yet to sign the bill into law.

The bill points to growing wariness in the US against Chinese technology on national security concerns as trade tensions simmer.

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Hikvision, controlled by the Chinese government, has previously supplied equipment to the US army to monitor its base in Missouri and to Memphis police, according to The Wall Street Journal. On Thursday, the company reported a 26 per cent year on year increase in net profit for the first half to 4.15 billion yuan (US$604 million).

Hangzhou-based Hikvision, listed on the Shenzhen Stock Exchange, plummeted as much as 9.4 per cent, and closed 5.9 per cent lower at 30.03 yuan, having shed 14 per cent this week.

Dahua Technology, also headquartered in Hangzhou, dropped as much as 9 per cent and ended 5.9 per cent lower at 15.99 yuan. The share has tumbled nearly 20 per cent this week.

“The ban itself will not have substantial impact on the company’s business. But due to its unclear points and semantic ambiguity in some terms, the bill might generate broader interpretations, which could extend the ban from federal agencies to non-federal installations [from using our products],” Hikvision said in a statement on Friday.

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Hikvision said it has set up a team to “provide a more accurate interpretation of the bill and analyse possible ramifications on the company in the event of the ban being extended”.

“We have been actively communicating with the US clients and trying as much as possible to minimise the bill’s negative impact [on the company],” the statement added.

Dahua also said it would analyse possible fallout arising from the bill.

Both companies warned “the possibility exists that our business in the US market might be affected” after the bill becomes effective.