Rising tide lifts shares along telecoms chain after ZTE comes close to resuming US operations

PUBLISHED : Thursday, 12 July, 2018, 3:20pm
UPDATED : Thursday, 12 July, 2018, 10:57pm

Yangtze Optical Fibre rose the most in over seven months in Hong Kong, which rubbed off on other related telecoms firms in the mainland, after the US and ZTE signed an agreement paving the way for China’s number two telecommunications equipment maker to resume business with its American suppliers.

The ban on ZTE, in place for nearly three months, will be removed once the company deposits US$400 million in an escrow account, the US Commerce Department said on Wednesday.

In response, ZTE climbed 25 per cent to HK$13.94. ZTE shares have lost about 59 per cent of their value since November.

ZTE chief demands cost cuts but promises not to reduce salaries in short term as full lifting of US ban nears

Yangtze Optical, which claims to be the world’s largest supplier of optical preform and fibre, surged 9.4 per cent in Hong Kong to HK$32, marking its biggest gain since November 16.

Its outperformance of the broader Hong Kong stock benchmark also comes after the success of its offline investor subscription for the company’s mainland initial public offering. At 26.71 yuan per share, it is expected to raise 1.89 billion yuan (US$283 million).

The IPO was split into 10 per cent offline investors and 90 per cent retail investors. The retail portion was oversubscribed by 150 times. Offline investors include IDG Capital, Aba State Investment Development Corp and Anbang Asset Management.

China Securities Regulatory Commission, the top watchdog, has been generally slow in approving IPOs this year to control risks in the financial markets. So Yangtze Optical’s smooth and successful IPO process underscores Beijing’s increasing policy focus to upgrade the economy, and supporting intellectual property protection amid the trade spat with the US, analysts said.

“China would like to encourage the big domestic optical and semiconductor companies,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “The reversal of ZTE’s fortunes amid the trade war is having a positive impact on the whole supply chain.”

Zhuang Dan, president of Yangtze Optical in 2016, said China’s cloud computing, big data, 4G network and the national broadband system were developing very fast, generating large demand for optical fibre and cable.

ZTE clears another hurdle with escrow agreement, ban still in place

Other firms of the Chinese telecom supply chain also surged in the mainland.

Qingdao Topscomm Communication, Universal Scientific Industrial Shanghai and Jiangsu Zhongtian Technology rose by the daily 10 per cent limit.

China Unicom gained 3.3 per cent to 4.95 yuan, Datang Telecom Technology advanced 4.6 per cent to 6.06 yuan. Wuhan Yangtze Communications Industry Group added 3.4 per cent to 29.84 yuan.

The Hang Seng Index also retraced higher after Wednesday’s slide, rising 0.6 per cent, or 169.14 points, to 28,480.83. The Hang Seng China Enterprises Index also advanced 0.9 per cent, or 94.60 points, to 10,752.86.

On the mainland, the Shanghai Composite Index gained 2.2 per cent, or 59.89 points, to 2,837.66 and the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – increased 2.2 per cent, or 73.53 points ,to 3,481.06.

The Shenzhen Composite Index tacked on 2.8 per cent, or 42.55 points, to 1,597.17 and the Nasdaq-style ChiNext rose 3.3 per cent, or 51.62 points, to 1,614.63.