Hong Kong in with a shot at Xiaomi IPO

Still smarting from the loss of Alibaba Group Holding, Hong Kong stands a good chance of being picked as the destination for Xiaomi's initial public offering when the company makes a call on the market best suited to help its growth push.

The low-cost smartphone maker is in talks to raise US$1.5 billion after closing a US$1 billion loan deal with banks last month.

A public offering, say experts, is the likeliest option now to build the war chest the four-year-old company would need to fulfil its global ambitions.

While software firms tend to bypass the city, Hong Kong has long been the favoured destination for hardware companies because investors here have a deeper understanding of the manufacturing supply chain.

Listed giants such as Hon Hai Precision Industry and Lenovo Group as well as the privately held Huawei Technologies have all built on their strong manufacturing and marketing base in China in Asia, which translates into higher valuations of their shares due to better brand awareness.

"Asian hardware and electronic component manufacturing companies are often valued better in Asia, given investors' familiarity with the equipment manufacturing industry value chain and the comparables listed in the region." said Mervyn Chow, the head of Credit Suisse's global markets solutions group for the Asia-Pacific.