SHARES in ZTE Corp surged by the 10 percent daily cap yesterday after it announced shareholders' approval to sell four billion yuan (US$526.3 million) in bonds to finance third-generation telephony development.

Shenzhen-listed ZTE jumped 10 percent to 58.19 yuan, although the Shenzhen Composite Index dropped by 0.45 percent yesterday.

"The big-cap 3G-related shares, such as China Unicom and ZTE, are expected to benefit from the coming 3G, and they are favored by investors," Yue Congzhong, an analyst at Zhongshan Securities, said in a recent note, who set ZTE's price target above 60 yuan.

ZTE will raise four billion yuan through the sale of five-year convertible bonds to finance research, manufacture and construction of 11 projects, including a home-grown TD-SCDMA (Time Division-Synchronous Code Division Multiple Access) phone and a new handset platform.

ZTE, the biggest public telecommunications equipment vendor in China, got the lion's share of China Mobile's 23.7-billion-yuan order in April to adopt 3G networks in 10 cities, based on home-grown TD-SCDMA technology.

"The coming 3G will bring a capital feast to equipment makers and handset vendors," said Wang Jianping, an official at China Center for Information Industry Development.

Investment in 3G will reach 50 billion yuan to 60 billion yuan annually from 2007 to 2011, Wang added.

In the first six months, ZTE posted a profit of 460 million yuan, or 0.48 yuan per share. Its revenue jumped 44 percent to 15.2 billion yuan.