Asian shares were broadly lower Wednesday, as investors look to the Federal Reserve’s policy decision and cues on future rate hikes. Japan’s Nikkei 225 was the only major regional index to rise, up 0.4%. Major markets including China, Hong Kong, Australia, Malaysia and Singapore were down less than 1%.
Wednesday’s Big Theme
ZTE Corp.’s major suppliers in Asia were lifted as the Chinese telecom equipment giant resumed trading following a deal with U.S. authorities to keep it afloat.
ZTE’s shares plunged as much as 41% on its first day of trading in nearly two months, reflecting investors’ concerns about its future. But the deal is much-needed relief for ZTE’s business partners and suppliers across Asia-Pacific.
Those include Hong Kong-listed Mobi Development, a seller of wireless antennas, and Shenzhen-listed telecom systems firm Eoptolink Technology Inc., both of which generate a significant portion of their sales from ZTE. Other suppliers include electronic component makers
in Taiwan and
in South Korea.
Mobi’s stock—which lost more than a third of its value in the days after ZTE suspended its shares in mid-April—recouped much of its lost ground, rebounding 33%. Genius Electronic Optical jumped 6.1% after losing 21% in the second half of April. And KH Vatec jumped 10.5%.
Alex Wong, a director at Ample Capital, said ZTE’s latest deal with the U.S. showed signs of thawing trade tensions between the two nations. But he cautioned that investors should contain their optimism, as the broader disputes over China’s massive trade surplus remain unresolved.
“Trade frictions remain on investors’ radar as the U.S. plans to unveil a list of some $50 billion worth” of Chinese import goods under a 25% tariff, he said.
Bocom International analyst Christopher Yim said the share-price rebound of ZTE’s suppliers reflects investors’ relief at their resumption of business with the company. But overhang remains for those firms from U.S. senators’ push to ban American suppliers from selling to ZTE, he added.
Mr. Yim, who earlier this week slashed ZTE’s stock target to HK$19.00, expected volatility for its shares as the U.S. penalties, loss of revenue over the past two months and the further disruption of business due to proposed management changes would weigh on its profitability.
S&P 500 futures were up 0.3% in Asia, following overnight gains by major U.S. indexes, led by a continued rally by technology shares.
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