ZTE Corp's shares fell by more than two percent on Tuesday after the U.S. Congress issued a report urging U.S. companies to stop doing business with Chinese telecom equipment makers.

Shares of ZTE, China's second largest telecom equipment maker, dropped by as much as 2.5 percent to HK$12.28 and quickly extended losses to more than 6 percent in early trade, underperforming the main Hang Seng Index's 0.5 percent gain.

On Monday, the U.S. Congress put out a report that asked U.S. companies to halt their businesses with China's top two telecom equipment makers, Huawei Technologies Co Ltd and ZTE due to national security concerns, raising fears of retaliation from China.

(Reporting by Lee Chyen Yee; editing by Anne Marie Roantree)