Shares in ZTE tumble after profit warning


Tue, Oct 16, 2012 - Page 15

Shares in Chinese telecoms firm ZTE (中興), accused by US lawmakers of posing a security threat, tumbled 15.9 percent in Hong Kong yesterday after it released a third-quarter profit warning.

The stock fell to close at HK$10.54 after it projected a net loss of between 1.9 billion yuan (US$303 million) and 2 billion yuan for the three months to Sept. 30. The benchmark Hang Seng Index ended virtually flat yesterday.

Operating revenue fell 13 percent in the same time period due to the “effect of delayed progress on certain international projects,” ZTE said in a filing to the Hong Kong stock exchange late on Sunday.

In Shenzhen, where ZTE is also listed, the stock fell by its 10 percent daily limit to 9.45 yuan.

“We see ZTE’s disappointing [third-quarter] performance as not solely due to company-specific issues,” Barclays said in a report.

The bank said it believed the poor network operating environment would also apply to other Chinese companies in the sector, warning that the “worse may not be over yet.”

ZTE said on Wednesday that US network giant Cisco Systems had ended a 2005 strategic cooperation agreement, after it was accused by US lawmakers of doing business with Iran and posing a security threat.

The US congressional investigation said ZTE and another Chinese telecoms firm, Huawei (華為), should be barred from US contracts and acquisitions.