LG Uplus Drops Over 4% Intraday Amid 'Reconsider US Troop Deployment If Using Huawei' Issue

[Asia Economy Reporter Oh Ju-yeon] LG Uplus's stock price fell by over 4% during trading on the 7th after it was reported that the U.S. Congress will pass a National Defense Authorization Act requiring consideration of whether the host country uses Chinese Huawei technology when deploying U.S. troops and equipment overseas.

As of 9:15 a.m. that day, LG Uplus was trading at 11,500 KRW, down 2.95% from the previous trading day. LG Uplus opened the day at 11,600 KRW, down 2.11% from the previous day, but the decline deepened, and the stock price plunged by as much as 4.64% during the session, trading at 11,300 KRW.

This sharp drop was due to reports that the U.S. Congress's proposed National Defense Authorization Act for Fiscal Year 2021 includes provisions requiring reconsideration of sending troops and equipment to countries using 5G technology from Chinese companies such as Huawei and ZTE.

According to the provisions, the U.S. Department of Defense must consider the risk factors that the 5G network of the host country may pose to personnel, equipment, and operations when deploying units and equipment overseas. The risks posed by Huawei and ZTE, leading Chinese telecommunications equipment companies, were specifically pointed out. Domestically, LG Uplus uses Huawei equipment in its 5G mobile communications and 4G Long Term Evolution (LTE) base stations, making it not immune to the impact of this issue.

Despite clear performance improvements, LG Uplus's stock price had not risen due to ongoing U.S. sanctions against Huawei, and it has now encountered another setback despite expectations of an expanding 5G market next year.

According to Hana Financial Investment, the inventory of Huawei network equipment components is being depleted, and it is estimated that all key 5G components will be exhausted by March to April 2021. Accordingly, Kim Hong-sik, a researcher at Hana Financial Investment, predicted, "Ultimately, after Huawei surrenders to the U.S. next year and the U.S. approves the supply of key 5G components, the U.S. sanctions against Huawei could come to an end." However, Kim also mentioned, "There is a high possibility of corrective measures being taken regarding past unauthorized use of U.S. technology, illegal subsidies provided by the Chinese government to Huawei, and discrimination against foreign companies in China," adding, "If investors' perspectives shift based on future performance, the stock price is likely to return to a normal range."

However, for now, the Huawei issue remains a negative factor rather than an expectation of performance improvement, and it is not helping the stock price recovery.

Unlike other telecommunications companies that rose together during the November stock market rally, LG Uplus is lingering near the bottom. SK Telecom rose 11.16% from 215,000 KRW at the close on November 2 to 239,000 KRW as of 9:46 a.m. that day, and KT's stock price also increased by 8.05% from 22,350 KRW to 24,150 KRW during the same period. However, LG Uplus only rose 2.23% from 11,200 KRW to 11,450 KRW.

This content was produced with the assistance of AI translation services.