ZTE plunges as share trading resumes after US regulatory probe

[HONG KONG] ZTE Corp slumped the most in nine months as China's second-largest maker of telecommunications gear resumed trade for the first time since an investigation by the US government said it violated trade sanctions with Iran.

The stock dropped 16 percent as of 9.35 am in Hong Kong, the biggest decline since July 8. The company said the impact of the US action was "highly uncertain" and it could face civil and criminal penalties, according to a statement late on Wednesday.

The Commerce Department put in place sanctions blocking exports to the Chinese company over allegations that it re-sold goods to Iran, a ban that was then suspended till June 30 after both sides opened negotiations.

Shenzhen-based ZTE said in Wednesday's statement it was "actively cooperating" with the investigation and still can't fully assess the impact and potential legal liabilities.

Since the US action, ZTE has replaced its president as it tries to get off the US export blacklist.

Shi Lirong, the top executive role for the past six years, will be replaced by Zhao Xianming, who will also become chairman of the board, the company said this week. The shares had been halted for about a month.

The company, which makes smartphones and networking equipment, said in a separate statement Wednesday that profit for the year ended December was lower than an earlier estimate it had given.

Net income for 2015 was 3.21 billion yuan (S$668.15 million), below a preliminary forecast of 3.78 billion yuan it made in January.

BLOOMBERG