Shares in Chinese telecoms equipment maker ZTE collapsed 39 per cent today as trading in the company resumed after it reached a settlement with the United States over its handling of a sanctions violation.
The decision came after US officials said ZTE had failed to take action against staff who were responsible for violating trade sanctions against Iran and North Korea. The company was fined USD 1.2 billion last year for those violations.
But last week the two sides reached a deal to replace the sanctions with a USD 1 billion penalty, plus another USD 400 million in escrow to cover possible future violations.
While the firm's future was ensured, it dived 39.22 percent to HK$15.56 during Hong Kong morning trade, while it also plunged by its 10 percent daily limit to 28.18 yuan in Shenzhen.
"While the nightmare is now over, ZTE will likely have to deal with many changes," analysts Edison Lee and Timothy Chau at Jefferies wrote in a note. "We expect significant near-term selling pressure and a volatile stock price."
The ZTE settlement came days after Beijing reportedly offered to ramp up purchases of American goods by USD 70 billion to help cut the yawning trade imbalance with the United States -- moving part-way towards meeting a major demand of US President Donald Trump.
Trump has demanded a USD 200 billion reduction in its trade deficit with China over two years.
Despite the settlement, there was no sign Trump had veered from plans to impose billions of dollars in tariffs on Chinese imports to punish Beijing for its alleged theft of US technology and know-how.
"If the US didn't 'free' ZTE in this way, US companies would find it very difficult in any moves in China, including decisions on mergers and acquisitions," Wong added.
Despite several US lawmakers' warning against easing sanctions on ZTE, citing national security concerns, Trump said earlier last month that he was looking at alleviating the tough sanctions on ZTE "as a favour" to Chinese President Xi Jinping.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)