ICT

ZTE shares plunges as Senate battles Trump over reprieve

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6 years ago

June 19, 2018

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Shares of Chinese firm, ZTE Corp plunged early Tuesday following the United States Senate’s passage of a defense bill which puts President Donald Trump reprieve initiative for the firm in jeopardy.

Recall that ZTE was hit in April with a seven-year ban barring U.S. suppliers selling to it after it broke an agreement to discipline executives who conspired to evade U.S. sanctions on Iran and North Korea.

At Trump’s urging, ZTE and the U.S. Commerce Department reached an agreement on June 7 to have the ban lifted. According to the agreement, the ban would only be lifted after ZTE pays a $1 billion fine and puts another $400 million in escrow in a U.S. approved bank for 10 years.

In the bill Senate included an amendment that could kill the Trump administration’s agreement to allow ZTE to resume business with U.S. suppliers, one of the few times the Republican-led Senate has veered from White House policy.

ZTE’s Hong Kong-listed shares tumbled as much as 24 percent to HK$10.02, its lowest in nearly two years, while its Shenzhen shares fell by their daily limit of 10 percent. Since trading resumed last week, the stock has lost 38 percent or more than $7 billion in market value.

The Senate voted 85-10 for the annual National Defense Authorization Act, throwing the state-backed company back into the center of a bilateral trade spat and reigniting uncertainty over the outlook for its crucial supply chain.

But before it can become law, the bill must be reconciled with one already passed by the House of Representatives that does not include the amendment. Any compromise measure must then be passed by both chambers and signed into law by Trump.

Last Wednesday, ZTE proposed a $10.7 billion financing plan and nominated eight board members as it seeks to rebuild its business.