You are here: Home » PTI Stories » National » News
Business Standard

China's ZTE dives 39% at resumption of trading in Hong Kong

AFP  |  Hong Kong 

Shares in Chinese collapsed 39 per cent today as trading in the company resumed after it reached a settlement with the over its handling of a sanctions violation.

Dealing in the firm was suspended in April after said it had banned American companies from selling and to it for seven years.

The decision came after US officials said had failed to take action against staff who were responsible for violating trade sanctions against and The company was fined USD 1.2 billion last year for those violations.

The move in April put the company's future in doubt and it became a key issue in a wider trade spat between and

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.

Shenzhen-based will also be required to change its entire board of directors and hire outside legal compliance specialists who will report to the for 10 years.

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

"While the nightmare is now over, ZTE will likely have to deal with many changes," analysts and at Jefferies wrote in a note. "We expect significant near-term selling pressure and a volatile stock price."

The ZTE settlement came days after reportedly offered to ramp up purchases of American goods by USD 70 billion to help cut the yawning trade imbalance with the -- moving part-way towards meeting a major demand of US

Trump has demanded a USD 200 billion reduction in its trade deficit with 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 for its alleged theft of and know-how.

"The US agreement with ZTE with fine and change of management, in other words, is a political deal," said at

"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.

warned in a note that the firm "should have a significant loss" in its full-year earnings because of the penalty as well as the impact of its management changes.

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

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, June 13 2018. 12:15 IST