Xiaomi bickering exposes Hong Kong stock exchange’s rivalry with Shanghai and Shenzhen bourses

Charles Li Xiaojia had to endure a hastily arranged flight to Beijing on Monday night, after a weekend of an uncharacteristically acrimonious war of words between the Hong Kong stock exchange and the operators of the Shanghai and Shenzhen bourses.

At the centre of the bickering sits Xiaomi, the world’s fourth-largest smartphone maker and, as of a week earlier, Li’s biggest customer this year in initial public offering (IPO) on the Hong Kong stock exchange.

At issue is whether Xiaomi’s Hong Kong-listed shares can be bought or sold by mainland Chinese investors via the Stock Connect programme, a cross-boundary investment channel between the city and the exchanges of Shanghai and Shenzhen.

Hong Kong Exchanges and Clearing Limited (HKEX), of which Li is the chief executive, expected it to be a matter of routine formality that would take effect on July 23. Both Xiaomi and the market operator said so during the company’s debut on July 9.

In a surprise statement last Saturday, the two mainland bourses pulled the rug from under Xiaomi and said the stock would be excluded from the Stock Connect pool, which cuts potentially billions of yuan of capital for the shares, and denies Chinese investors the chance to partake in the earnings of a company that has promised to increase its earnings tenfold.