Xiaomi delays CDR, will hold HK IPO

Xiaomi will delay its highly anticipated issue of Chinese Depositary Receipts (CDR), postponing the move until after its Hong Kong IPO, said Xiaomi on its official Weibo account on Tuesday.

The announcement came as Chinese financial markets posted big drops, following news that the Trump administration has threatened to impose new tariffs against $200 billion of Chinese goods. The Shanghai Stock Exchange closed almost 4 percent lower on Tuesday.

Experts said that Xiaomi was reacting to the new market environment.

“Things have changed and right now is not a good time to issue A shares. Xiaomi made a smart decision,” Dong Dengxin, director of the Financial Securities Institute at the Wuhan University of Science and Technology, told the Global Times.

“Given the escalating China-US trade war, it is too risky for a company of the scale of Xiaomi to go public in the A-share market right now,” said Dong.

CDR enables domestic investors to hold shares elsewhere, thus allowing offshorelisted mainland companies to sell shares in the domestic market.

“With the trade war in the background, US markets are likely to fall too. That will affect the original foreign shares on which Chinese technology companies will base their CDR issues.”

Xiaomi did not mention any changes to its plans for an IPO in Hong Kong, and it confirmed to the Global Times on Tuesday that it has scheduled a press conference in Hong Kong for June 23. The IPO in Hong Kong is expected as soon as June 25.

Domestic stock analysts welcomed the news. “Markets were somewhat nervous about Chinese ‘unicorns’ and listing in domestic markets would bring some liquidity problems to the markets,” said Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co on Tuesday.