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

Shares in Xiaomi, the Chinese mobile phone maker, slid nearly 6% at the start of trading in Hong Kong.

Xiaomi's Founder, Chairman and CEO Lei Jun (right) and Chew Shou Zi, senior vice president and chief financial officer gesture during the listing ceremony at the Hong Kong Stock Exchange in Hong Kong on July 9, 2018.

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. Some analysts say the share price offering of HK$17 ($2.17) was too high a valuation multiple for the company compared to its competitors like Apple, making the stock too expensive from the onset.

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.

"At this critical moment in Sino-US trade relations, the global capital markets are in constant flux", he said.

By contrast, China Literature Ltd, the e-book arm of Tencent Holdings, late past year raised $1.1 billion in its Hong Kong IPO amid heavy demand, with the retail portion being 625 times oversubscribed.

The company had also expected to split its listing with another offering on mainland China, but cancelled that.

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Xiaomi CEO and co-founder Lei Jun acknowledged the unfortunate timing in remarks at the Hong Kong stock exchange on Monday morning.

Xiaomi's float was the first under the city's new rules allowing firms to weight voting rights in favor of company founders, as part of efforts to encourage more tech groups to choose Hong Kong over NY, its arch-rival.

"We are an internet firm".

"From day one, we've set up a dual-class share structure". The market is always open. "It's open to everybody.If you don't like the price, you can stay away".

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

The company is now the biggest smartphone vendor in India and is pushing into European markets including Spain and Russian Federation, though it has lost share in China recently to lower-cost rivals.

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