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Are Xiaomi’s shares set to climb further?

Investor confidence in Xiaomi, the world’s third-biggest smartphone manufacturer by volume, soared after a US judge said the firm could win a full reversal of a Trump-era ban.

  • Xiaomi Corporation (HKEX: 1810) share price jumps 7.2% to HK$26.10
  • The Chinese smartphone maker has been removed from a US blacklist
  • Xiaomi might also buy back its shares on the open market for up to HK$10 billion
  • Analysts on average were targeting the stock price to hit HK$30.50
  • Trade Xiaomi shares with an IG account

Xiaomi shares sustain strong upward momentum

Hong Kong-listed shares of Xiaomi, which makes smartphones and gadgets, on Tuesday (16 March 2021) rose another 7.2% to HK$26.10 by 13:55 SGT.

The stock had soared 7% on Monday, after advancing 4% last Friday.

Investors were reacting to the temporary halt of a Trump-era US investment ban on Friday (12 March 2021), and to Xiaomi’s HK$10 billion share buyback plan announced last Thursday (11 March 2021).

Bloomberg data showed 41 analysts with ‘buy’ calls on Xiaomi shares, while four rated ‘hold’ and four recommended ‘sell’. Their average target price was HK$30.50 as of Monday night.

Court suspends ban on investment in Xiaomi

A US court has temporarily blocked Washington from forcing American investors to divest from Xiaomi.

The Trump administration had placed Chinese companies including Xiaomi on a list, classifying them as having alleged links to China’s military, triggering financial restrictions.

But District Judge Rudolph Contreras last Friday issued a preliminary injunction removing Xiaomi from the blacklist and suspending the ban on US investors buying the smartphone giant’s securities.

This would shield Xiaomi from ‘irreparable harm’, he added. With the ban, the company was facing the possibility of being delisted from US bourses and removed from global indices.

Xiaomi is likely to win a full reversal of the ban as the litigation unfolds, said Contreras.

The judge said the US government had not ‘made the case that the national security interests at stake here are compelling’.

Xiaomi had appealed against the blacklisting, saying Washington’s moves were ‘incorrect’ and ‘deprived the company of legal due process’.

Xiaomi unveils massive share buyback plan

Meanwhile, on Thursday night, Xiaomi announced its board approved a mandate to repurchase shares in the open market for as much as HK$10 billion, or about US$1.3 billion.

The repurchase programme came despite Xiaomi’s stock price slump then.

Before the announcement, the shares had lost more than a third of their value since the US blacklist was announced in mid-January 2021.

Buying back shares ‘in the present conditions’ will demonstrate the company’s confidence in its business outlook and create value for shareholders, Xiaomi said.

Bloomberg Intelligence analysts wrote that the temporary injunction and the buyback plan could reverse negative market sentiment surrounding the consumer electronics maker.

The analysts believe Xiaomi remains well-positioned to capture market share amid Huawei Technologies’ retrenchment, and the rollout of 5G devices can also increase its average prices and margins.

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