Xiaomi, the Chinese smartphone maker that’s had to pare back what was once billed as the world’s largest initial public offering, has made it past the finish line as investors overbought the retail portion of its US$6.1 billion blockbuster offer. The Chinese smartphone maker received 109,446 applications for 1.03 billion shares at the end of a four-day offer period, with the retail subscription overbought by 8.5 times and locking up about HK$23 billion (US$2.9 billion) of capital, according to brokers and bankers familiar with the sale. The IPO, which ultimately aims to raise up to US$6.1 billion , is the eighth-largest in Hong Kong since 1986, and one of the best-sold for offerings larger than US$5 billion. “Considering the size of the offering, and the current environment, 8.5 times is not too bad,” said Kenny Tang Sing-hing, chief executive of Jun Yang Securities. Compared with smaller offerings like the 309 times oversubscription of ZhongAn Online P&C Insurance HK$11 billion IPO last September, it was a different story. Retail investors tended to pour money into promising IPOs in the hope of making a quick profit when their shares trade for the first time on the exchange. ZhongAn and the four biggest tech listings since then – e-publisher China Literature, online car retailer Yixin Group, gaming hardware maker Razer and Ping An Good Doctor – all attracted enormous oversubscriptions and locked in huge amounts of capital. Online health care platform Ping An Good Doctor’s IPO was oversubscribed by more than 650 times, while Yixin’s offer was 560 times overbought. China Literature, 62 per cent owned by Pony Ma’s Tencent Holdings, received 625 times more capital than its shares on offer, locking in HK$521 billion of capital, equivalent to about a third of Hong Kong’s money supply. Where do blockbuster IPOs stand as the fizz goes out of Hong Kong’s stock trading debuts? The frenzy has fizzled out. Of the 87 companies that raised funds in the city this year, 53 per cent of the total traded at prices below their offering prices in their first month of trading, according to Bloomberg data. And 20 companies fell below their offering prices on their trading debut. To be sure, Xiaomi’s offer was a large IPO for the market to digest, and came at a time when the cost of money measured by the 1-month interbank offered rate had soared to a decade high, brokers said. Even three of China’s wealthiest tycoons - Li Ka-shing, Jack Ma Yun and Pony Ma Huateng - poured in their personal fortunes to back Xiaomi. Li, the former chairman of Hong Kong’s largest conglomerate CK Hutchison Holdings, bought US$30 million of Xiaomi’s shares, said his company’s co-managing director Canning Fok Kin-ning. For Xiaomi, the problem could be one of timing, according to some analysts. “Xiaomi’s IPO has an unfortunate listing window, sort of becoming a victim of the escalating US-China trade tensions, which has sunk Hong Kong stocks into a technical bear market,” said Alex Wong Kwok-ying, director of asset management at Ample Capital. “Investors fear to tread [the market] at the moment.” The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, entered bear territory on Tuesday, joining mainland China’s benchmark Shanghai Composite Index, which has also sunk 20 per cent from its peak earlier in the year. This could affect investors’ appetite for major IPOs in the pipeline, such as China Tower, the world’s biggest operator of mobile phone towers, which hopes to raise as much as US$10 billion, and online-service booking app Meituan, which has already filed a listing application to the Hong Kong stock exchange and is expected to float in the third quarter. Another factor weighing on Xiaomi’s IPO is its pricing, which raised eyebrows by valuing the company at between 39 and 51 times earnings. That compares with the 14.8 times forward earnings at Apple, the world’s most profitable smartphone and devices maker. “Hong Kong investors still have the ‘old economy’ mindset of using P/E ratios to value tech companies,” Wong said. “It could take years to build a ‘new economy’ culture. ” Rising US interest rates have sparked a wave of capital outflows from emerging markets, and sent funding costs in Hong Kong soaring. The cost of money measured by the one-month interbank offer rate, known as hibor, recently rose to a 10-year high of 2.125 per cent. Xiaomi’s IPO fails to dazzle even if Hong Kong tycoons are believers At the current IPO margin financing rates of 2.88 to 3 per cent, Xiaomi’s shares need to rise by 10 per cent to 20 per cent on their debut for investors just to cover their costs, said Alvin Cheung, associate director at Prudential Brokerage. Investors are also hesitant to increase their bets after seeing many so-called new economy IPOs quickly falling below their offer prices. “The halo effect, or mythology, of ‘new economy IPO’ is on the wane,” said Cheung. “Investors have learned their lessons that it is not necessarily a guarantee of making money.” The shares of four of the five biggest tech IPOs since September are trading below their offering prices. Two of them, Yixin Group and Razer, have fallen about 50 per cent from their peaks. Xiaomi says it can grow tenfold to justify US$6.1 billion IPO In the past few months, the shares of about half of 87 IPOs have slipped below their offer prices within the first month of trading, according to Bloomberg data. The lacklustre outcome for Xiaomi may cast a pall over Hong Kong’s stock exchange, which last year pushed through the biggest overhaul of its listing regulations in decades in a bid to attract biotechnology research teams and big technology companies like Xiaomi to raise capital in the city. Xiaomi will become the first company to list in Hong Kong with a dual-class shareholding structure, which gives its founding shareholders greater voting power even though they have minority stakes.