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Smartphone maker Xiaomi's weak Hong Kong debut casts shadow on tech listings

Reuters  |  HONG KONG 

By Julie Zhu

HONG KONG (Reuters) - Chinese 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.

Xiaomi priced its Hong Kong initial public offering (IPO) at HK$17 per share, the bottom of an indicative range, raising $4.72 billion in the world's biggest in four years.

Its shares touched a low of HK$16 in opening deals. By 0234 GMT, the stock was trading at HK$16.48, down 3 percent, while the main Hong Kong stock market index was 1.4 percent higher.

The IPO pricing valued the firm, which also makes and gadgets, at about $54 billion, almost half its original $100 billion ambition earlier this year.

"Trading below the issue price suggested that investors still felt the valuation of the stock was relatively high as compared with Tencent and Apple," said Linus Yip, at

Xiaomi's HK$17 price represents a multiple of 39.6 times 2018 earnings, while maker is trading at 16 times and Chinese and gaming giant at 36.

The listing comes at a delicate time for Hong Kong's stock market, with the benchmark index hitting a nine-month low last week as investors fret over escalating trade tensions between the and

The Sino-U.S. trade dispute has roiled financial markets, including stocks and currencies, and the global trading of commodities from soybeans to coal over the past several weeks.

Xiaomi's float failed to attract strong interest among investors with the gathering demand that was only 9.5 times the number of shares on offer, according to its filing on Friday.

By contrast, Literature Ltd, the arm of Tencent Holdings, late last year raised $1.1 billion in its Hong Kong IPO amid heavy demand, with the being 625 times oversubscribed.

Apart from tough market conditions, the tepid demand for Xiaomi's offering was also because many potential investors mainly view it as a instead of a firm as the company calls itself, sources have said.

The Xiaomi float adds to Hong Kong's $7 billion worth of new listings so far this year. It is also the first under the city's new exchange rules permitting dual-class shares, common in the U.S. tech industry in an attempt to attract tech floats.

"We are an firm. From day one, we've set up a dual-class share structure. Without the innovation of Hong Kong's capital markets, we wouldn't get a chance to go public in Hong Kong," Xiaomi's founder and told a listing ceremony at the Hong Kong stock exchange.

IPO PIPELINE

Xiaomi's debut is seen as a key test of investor sentiment for what is expected to be a packed second-half of the year for Hong Kong IPOs, with offerings including Meituan Dianping.

Tower, the world's largest mobile tower operator, has won approval for an IPO that could raise up to $10 billion. However, its listing timing will depend somewhat on Xiaomi's stock performance, sources have told

Shares of some other tech-related companies that floated recently have been weak in Hong Kong. Ping An Healthcare and Technology Co Ltd dropped below its IPO price on the second day of trading in May.

Asked if the low pricing of some including Xiaomi will weigh on upcoming IPOs, Hong Kong stock exchange said: "We cannot put a brake. The market is always open. It's open to everybody...If you don't like the price, you can stay away."

Xiaomi sold about 2.18 billion shares, making the IPO the largest in the since raised $25 billion in in 2014.

Xiaomi focuses on low-priced, high-performance and touts an innovative business model that features online services, a range of built by partner firms, and a that includes a network of physical stores.

It is now the biggest vendor in and is pushing into European markets including and Russia, though it has lost share in China recently to lower-cost rivals.

(Reporting by Julie Zhu; Additional reporting by and Sijia Jiang; Writing by Sumeet Chatterjee; Editing by Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, July 09 2018. 09:03 IST
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