Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

  • Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Chinese Smartphone Maker Xiaomi Falls in Hong Kong Trading Debut

Chinese smartphone maker Xiaomi Corp's shares fell as much as 6 percent on debut in Hong Kong due to valuation concerns, delivering a blow to investor sentiment in the tech sector where peers have lined up listings in the city.

Its shares were priced at 17 Hong Kong dollars (about $2, £1 or AU$3), but hit a low of 16 HK dollars before bouncing back up to 16.88 HK dollars ahead of the midday break, according to Reuters.

The company's weak debut comes at a time when global markets have been roiled by the escalating trade clash between the United States and China.

China's Xiaomi, the world's fifth biggest seller of smartphones, made an underwhelming public debut after it hit the Hong Kong Stock Exchange amid concerns around an ongoing trade war between the US and China.

Xiaomi's IPO valued the firm, which also makes internet-connected home appliances and gadgets, at $54 billion, nearly half the $100 billion it had initially hoped for and below its more recent target of at least $70 billion.

By contrast, China Literature Ltd, the e-book arm of Chinese gaming and social media firm Tencent Holdings, late past year raised US$1.1 billion for its Hong Kong IPO amid heavy demand, with the retail portion being 625 times oversubscribed. That is far short of the oversubscription rates for other tech IPOs in Hong Kong. In June, we said that Xiaomi was looking to raise about $5 billion (HK$39.22 billion) from shares, while it didn't meet its goal in the first day of trading, it is over half way there and maybe things will pick up for the unique firm. However, its listing timing will depend somewhat on Xiaomi's stock performance, sources have told Reuters.

Xiaomi made 2.18 billion shares available for purchase and was expected to sell them for between HK$17 ($2.17) and HK$22 ($2.8). Ping An Healthcare and Technology Co Ltd dropped below its IPO price on the second day of trading in May. "It's open to everybody.If you don't like the price, you can stay away".

Speaking at the ceremonial opening of trading, Xiaomi's chairman Jun Lei acknowledged that the timing of the IPO might not be optimal given the state of trade friction between the U.S. and China.

But doubts about the sustainability of its business model were among the reasons for the lower valuation, analysts said.