Chinese Telecom Giant ZTE Resumes Trading, Drops 39% After Deal With US

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In Shenzhen, the firm's shares were down 10% in early trade, which is the maximum allowed on the mainland. The Commerce Department placed additional sanctions on the company after it failed to follow through with its reorganization plan and lied to the USA government about it.

The deal will involve ZTE paying a $1bn penalty and hiring a US-approved compliance team. While that averts an imminent collapse, investors remain concerned about the distraction of a management overhaul and its ability to regain credibility in global markets.

ZTE, whose survival has been threatened by the ban, secured the lifeline settlement from the Trump administration on Thursday. "We expect significant near-term selling pressure and a volatile stock price".


Politico noted that the amendment spreads a wide net, with the outlet saying the language used "prohibits the federal government from doing business with ZTE or Huawei or other Chinese telecom companies".

But the bipartisan senate amendment, which has been added to the must-pass National Defense Authorization Act, would essentially kill that agreement by retroactively reinstating financial penalties and continuing the prohibition on ZTE's ability to sell to the US government. -China relations, national security, trade and President Donald Trump's ties to fellow Republicans in the Senate. Analysts at Jefferies gave a price target of HK$14.41 in a research note, down from more than HK$25 before the suspension.

Commerce Secretary Wilbur Ross last week announced the US reached a deal with ZTE that includes a record fine, changes to the company's board and management and USA compliance officers. "We'll see if it does" get through Congress, Ross said in an interview in Washington on Tuesday.


The company's shares have fallen 13 percent since the ban was imposed in April. In addition, within 180 days, ZTE must post calculations of the USA components in its products on its website in Chinese and English.

ZTE, in its filing, detailed extensive steps it will take to comply with the settlement.

According to a Reuters estimate based on company filings and a source with knowledge of the matter, that could result in about 40 senior executives being replaced including its 14-person board, based on its current management structure.


It will also complete and submit nine audit reports of its compliance with US export control laws. "And this would essentially put the denial order back into effect", he said. ZTE then ceased major operations.

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