ZTE shares slump to 3-year low

by Wadsam | July 16, 2012 6:28 am

[1]ZTE Corporation’s shares have been hit hardly amid probe by the U.S. government of their sale of banned U.S. computer equipment to Iran and its attempts to cover it up by shredding documents.

“The FBI probe would adversely affect ZTE’s ability in bidding for overseas projects, and it’s a major negative,” said Lou Zhen, a fund manager at Shanghai Anode Industrial Investment Co, which doesn’t own ZTE shares. “Investors have reason to be concerned about the company’s growth prospects and there’s still room for the stock to fall.”

If it is found to have illegally sold U.S. computer products to Iran, the corporation might face fines and restrictions on its U.S. operations.

The EU has also begun investigation on ZTE and Huawei, to discover whether the two Chinese firms are illegally subsidized by the Chinese government. This investigation has further pressured ZTE’s shares in the past month.

“The biggest risk in investing the stock is that it’s non-transparent. It’s related to the nature of the business and coupled with the fact that the management is not really that willing to talk to the investors,” said Jenny Tian, a managing partner at Hong Kong-based hedge fund Springs Capital.

The slow economic recovery of the EU and a fall in the Euro has also hurt the shares.

ZTE’s shares have more than halved in value since the beginning of the year.

Endnotes:
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