Shares of ZTE Corporation (ASX: 000063) and ZTE (ASX: 00763) rose in both the A-share and H-share markets, with A-shares gaining over 7% and H-shares surging more than 10%.
At the time of writing, ZTE's H-shares were trading at HK$31.22, with a turnover exceeding HK$13 billion.
Market Drivers and Policy Support
The move follows a notice issued by the Ministry of Industry and Information Technology regarding a pilot program for coordinated provincial and ministerial development of 6G innovation.
The notice outlines goals to be achieved by 2029, including fostering a batch of independently innovative 6G technology solutions, cultivating promising new business application scenarios, and encouraging a diverse range of new terminal products, thereby providing strong support for the commercial deployment of 6G.
Analyst Outlook and AI Catalyst
In a separate research note, Morgan Stanley suggested that ZTE could be in for a re-rating as investor focus shifts to a recovery phase, coupled with the re-emergence of AI catalysts.
On the edge device front, the firm highlighted ZTE's collaboration with ByteDance on the "Doubao" AI assistant, integrating agent, multimodal, and system-level AI capabilities into smartphones.
Strong early demand indicators, such as the initial batch of products selling out, demonstrate robust market interest.
Morgan Stanley expects ZTE to deepen this collaboration, potentially paving the way for broader commercialization of AI phones, which could serve as a significant catalyst for sentiment and valuation.
Projected Financial Turnaround
The bank further stated that a key inflection point for ZTE is anticipated in the second half of 2026, when a low base effect is expected to support a return to positive profit growth.
Short-term earnings risks are largely priced in by the market, with a return to growth forecast for H2 2026.
While near-term profits are expected to remain under pressure after a weak Q1 2026 due to gross margin pressures, increased operating expenses, foreign exchange losses, and higher impairment provisions, the market appears to have largely digested this impact, with expectations already reflecting weakness through Q2 2026.
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