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Xiaomi makes a stellar rebound after a dud debut

First days can be tough – ask Xiaomi. After a sloppy debut on Monday, the Chinese smartphone maker made a sparkling rebound on its second trading day on Tuesday, gaining up to 15% during the session and closing 13% higher. The company raked in $6 billion in market cap. The stock price closed at HK$19, higher than the issue price of HK$17, making up for the debacle on the first day when it lost more than 5% and closed around 1% lower.

The recovery was primarily driven by the news that Xiaomi will join the Hang Seng Composite Index later in July, which will give investors from mainland China access to its shares through investment channels such as Stock Connect.

Xiaomi’s IPO was the largest global tech IPO after Alibaba four years ago and the company raised $4.7 billion, much lower than its $10 billion goal. The stock was priced at the low end of the previously announced range of HK$17-22. The company blamed the rough stock market environment along with the US-China trade war for the disappointing performance.

Related: Xiaomi’s Hong Kong debut fails to impress

While some analysts are doubtful over Xiaomi’s ability to grow profit margins, others are optimistic. They believe the company’s novel and affordable smartphones along with the extra revenue from other services like apps will help drive profits.

Xiaomi still has to prove to investors that it can move beyond low-priced smartphones and into internet services. To do this, it must generate more earnings from businesses outside its smartphone operations.

Xiaomi postponed its China listing indefinitely, which resulted in its valuation coming to around $54 billion instead of the previously announced target of close to $100 billion. Xiaomi has a strong presence in India and is planning to expand into more international markets in the near future.

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