ZTE says US investigation may leads to penalties, sink trading in Hong Kong

Chinese telecom equipment maker ZTE Corp sent out a warning over possible criminal and civil liabilities after a United States government led trade-sanction violation investigation.

ZTE said it is also unable to assess the investigation's potential impact and legal liabilities on the results and financial positions.

The announcement, released on Wednesday night, sent ZTE stocks in Hong Kong down despite the strong 2015 results the company released on the same day.

Investors gave a split reaction to ZTE's stocks traded in Hong Kong and the Chinese mainland.

Company stocks in Hong Kong slumped by more than 15 percent Thursday morning closing at HK$12.7 ($1.64), a 10.31 percent drop. The Shenzhen-traded shares closed at 15.22 yuan ($2.35), an increase of 1.06 percent.

ZTE saw a rapid growth of revenue and net profit in 2015, according to the company. Its revenues slightly exceeded the 100 billion yuan mark in last year, a 23 percent increase year-on-year.

ZTE is the second largest telecom equipment maker in China, after Huawei Technologies Co Ltd. It is also seeking growth in the smartphone sector, launching both premium-end and budget handsets around the world.

In March, the US Commerce Department said ZTE re-sold prohibited products to Iran, a violation of US laws.

The Chinese company said it is cooperating with the investigation. Shi Lirong, its long-time chairman and president stepped down earlier this week. The industry speculated the investigation triggered Li's departure, but ZTE said the matters were not related.