Xiaomi Corporation (1810) surged more than 13 percent on its second trading day, following the announcement that it will be included in the FTSE China A50 index from July 16.
After its disappointing debut on Monday, the Chinese smartphone maker finished yesterday at HK$19, well above its HK$17 initial public offering price.
Xiaomi will also join the Hang Seng Composite Index on July 23.
Macquarie gave Xiaomi a target price of HK$30 after Lei Jun, founder, chairman and chief executive, said he will help boost the shares.
Macquarie said in a report that market share of smartphones by Xiaomi could reach 14 percent by 2020, led by the growing demand from China and Southeast Asia.
About HK$9.7 billion worth of shares of Xiaomi changed hands yesterday, more than the value traded during its debut. That rebound more than made up for Monday's 1.2 percent decline: the worst first-day performance by a HK$1 billion-plus Hong Kong IPO since 2015.
Chief executive Carrie Lam Cheng Yuet-ngor said at the RISE conference that the government will support the new economy and technology companies, following Xiaomi becoming the first dual-class stock listed in Hong Kong.
In the long run, Xiaomi still needs to convince investors it's capable of shedding a reliance on cheap phones and becoming an internet giant. The company now faces intense scrutiny while it tries to prove it should be twice as expensive as Apple Inc. It will need to show in future financial results that it can squeeze more profit out of non-smartphone businesses from rice-cookers and scooters to online content.
"It's mostly a smartphone company, or hardware company because they do other things as well," said Daniel Baker, an analyst with Morningstar Investment who has a sell rating and a target price of just HK$10 on Xiaomi. He wouldn't speculate on yesterday's spike. But "if they can develop some sort of ecosystem across the IoT spaces as well as the smartphone spaces, then it might well develop some sort of switching cost and a real way to increase returns and margins."
Meanwhile, Hong Kong shares ended roughly flat yesterday, as China's June inflation accelerated, showing little impact from the trade frictions with the United States, which threaten to hurt Chinese exports and dampen business sentiment.
The Hang Seng Index dropped six points to finish at 28,682, with index heavyweight Tencent Holdings (0700) losing 2.3 percent.
The sub-index of the Hang Seng tracking energy shares rose 1.4 percent while the IT sector dipped 2.07 percent, the financial sector was 0.38 percent higher and property sector dipped 0.04 percent. The top gainer on the HSI was CNOOC (0883), up 2.52 percent, while the biggest loser was China Mengniu Dairy (2319) which was down 3.93 percent.