Optical communication stocks plunge; Changfei Fiber drops 17% on US bill to ban Chinese optical modules
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Optical communication concept stocks suffered a heavy selloff in Hong Kong trading. Yangtze Optical Fibre and Cable fell 17%, while Zhongji Innolight dropped nearly 12%. The decline was triggered by multiple bearish factors: a US cross-party bill proposing to ban Chinese optical modules from federal sensitive systems, naming Zhongji Innolight and Eoptolink as restricted suppliers; Hengtong Optic-Electric's plan to issue up to 6.636 billion yuan in shares for optical communication projects; and Oracle's force majeure notice to a data center developer, raising doubts about the pace of future optical module procurement. Citigroup noted that Zhongji Innolight and Eoptolink have limited exposure to US defense or intelligence supply chains, and the bill's five-year transition period and exemption clauses provide near-term buffers, but political risks require monitoring. Jefferies stated that a US ban on Chinese optical modules in private data centers is very unlikely, calling the bill mostly policy noise.
Source report
Hong Kong, [Date] – Shares of optical communication companies suffered heavy losses in afternoon trading, with several major players seeing double-digit declines.
Key Stock Movements
- Yangtze Optical Fibre and Cable (06869): Down 17.00%, trading at HKD 154.8
- Junzhi Group (01300): Down 14.20%, trading at HKD 2.96
- Zhongji Innolight (03308): Down 11.70%, trading at HKD 1,034.0
- Cambridge Industries (06166): Down 11.32%, trading at HKD 102.6
Market Headwinds
The sector faced a series of significant negative developments:
- U.S. Legislative Risk: A bipartisan group of U.S. lawmakers has proposed a bill that would ban the use of Chinese optical modules in federal sensitive systems. The legislation specifically names Zhongji Innolight and Eoptolink as restricted suppliers.
- Capital Raising Pressure: Hengtong Optic-Electric announced plans to issue shares to raise up to RMB 6.636 billion, with proceeds intended for nine projects including optical communications.
- Demand Uncertainty: Oracle recently issued a force majeure notice to data center developers, indicating that a project may not be completed on schedule by 2028. This has raised concerns about the pace of future optical module procurement.
Analyst Commentary
Citi noted that the business exposure of Zhongji Innolight and Eoptolink to the U.S. government's defense or intelligence supply chains is not significant. The bill's five-year transition period and exemption clauses further buffer near-term disruptions, though political risks warrant monitoring.
Jefferies stated that the likelihood of the U.S. banning Chinese optical modules from private data centers is very low, and the bill currently represents more policy noise than substantive threat.
Source
智通财经Eastern
Part of this Story
US bill targeting Chinese optical modules triggers 7% sector plunge in China stocks