Smartphone maker’s inventory drops in Hong Kong debut

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Can Chinese smartphone giant Xiaomi survive a trade war?

Xiaomi had a bumpy begin to its market debut in Hong Kong on Monday.

In early buying and selling, shares within the Chinese language smartphone maker sank as a lot as 5.9% from their itemizing worth, which was already at the bottom of the range the corporate had sought. They later recovered most of their losses, however nonetheless closed down 1.2% regardless of positive factors within the broader market.

Xiaomi’s IPO raised $4.7 billion at a valuation of about $54 billion — the world’s largest tech or telecom itemizing since Alibaba (BABA) raised greater than $20 billion in 2014, in line with information supplier Dealogic. However Xiaomi’s providing ended up far smaller than the $10 billion target that had been reported earlier within the yr.

The corporate’s weak debut comes at a time when world markets have been roiled by the escalating trade clash between the USA and China. The dispute has its roots in American issues about China’s tech ambitions and its enormous commerce surplus with the USA.

xiaomi lei jun hkex
Xiaomi CEO and co-founder Lei Jun gave a thumbs as much as supporters and reporters, but in addition acknowledged the unlucky timing of the IPO.

Shares in Hong Kong and Shanghai have taken heavy hits. Earlier than Monday, Hong Kong’s benchmark index had fallen greater than 10% from early June.

Xiaomi CEO and co-founder Lei Jun acknowledged the unlucky timing in remarks on the Hong Kong inventory alternate on Monday morning.

“At this crucial second in Sino-US commerce relations, the worldwide capital markets are in fixed flux,” he mentioned.

“Though the macroeconomic circumstances are removed from supreme, we imagine an ideal firm can nonetheless rise to the problem and distinguish itself,” Lei added.

Related: Xiaomi is going after Europe

Analysts say a mixture of issues have weighed on Xiaomi’s IPO.

“The tit-for-tat happening within the political entrance between the Unites States and China is spilling over, particularly within the tech house,” mentioned Jake Saunders, an analyst at ABI Analysis. “The way in which ZTE obtained very severely pummeled in the USA … that is definitely additionally had influence,” he added.

Chinese language smartphone and telecommunications tools maker ZTE has been in crisis because the US authorities banned American corporations from promoting it elements, citing violations of an earlier deal that punished the corporate for evading sanctions on Iran and North Korea.

Related: How China’s Xiaomi took India’s smartphone market by storm

Xiaomi has additionally confronted questions from analysts over its potential to extend revenue margins sooner or later, on condition that a lot of its smartphone gross sales are on the decrease finish of the market.

“The market is actually involved about how a lot development Xiaomi can generate in 2019, and whether or not the corporate can ship” on what it pitched to buyers, mentioned Hao Hong, chief strategist at Hong Kong-based dealer BOCOM Worldwide.

Xiaomi argued that it ought to obtain a better valuation than different {hardware} makers due to the web companies — equivalent to music and video streaming apps — it affords with its gadgets.

Enthusiasm for Xiaomi might have waned as a result of buyers are holding out for different huge Chinese language tech IPOs on the horizon, Hong mentioned.

Tencent (TCEHY) mentioned over the weekend that it plans to list its music streaming business in the United States, and on-line companies platform Meituan Dianping filed final month to go public in Hong Kong. In the meantime, ride-hailing firm Didi Chuxing and Alibaba-affiliated digital funds agency Ant Monetary are additionally reportedly considering IPOs.

Related: Xiaomi’s shrinking IPO shows tougher climate for China tech

Based in 2010, Xiaomi was the fifth largest smartphone maker on the planet final yr, in line with analysis agency IDC.

Its predominant enterprise is telephones, but it surely additionally sells a spread of different internet-connected gadgets, together with scooters and even sensible rice cookers. Most of its gross sales are in China, but it surely’s rising aggressively in different nations.

Xiaomi overtook Samsung to become the number one smartphone seller in India earlier this yr. The corporate can also be making waves in Europe, the place after lower than two years out there, it has turn into the fourth largest smartphone vendor. Latin America can also be on the horizon.

— Pia Deshpande contributed to this report.

CNNMoney (Hong Kong) First printed July 8, 2018: 9:28 PM ET





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