Xiaomi Corp stock bounced back with a 1.75 per cent increase on Wednesday (20 January) morning, rebounding from its previous plunges triggered by the blacklisting of the company by the US Department of Defense last Thursday (14 January).
Earlier on Thursday, the US Department of Defense added nine companies to its list of alleged Chinese military companies, including Xiaomi.
This was in line with the executive order signed by President Donald Trump last November, which was set to take effect in January, to bar investment in companies designated as supporting efforts of China’s military, intelligence and security apparatuses.
By placing Xiaomi under its “Communist Chinese military companies” list, US investors will not be able to purchase Xiaomi securities and will ultimately have to divest down the line, unless the order is overturned by the incoming presidency of Joe Biden.
In a statement, the Department of Defense said it was “determined to highlight and counter the People’s Republic of China’s military-civil fusion development strategy” that allowed it to access key technology and security data.
Similar actions have also been made by the US against other tech firms, including Huawei and chip giant SMIC, hobbling their ability to import key technology and compete internationally.
Xiaomi was co-founded by billionaire entrepreneur Lei Jun in 2010 and went public on the Hong Kong stock exchange on 9 July 2018.
The company overtook Apple last year to become the world’s third-largest smartphone manufacturer.
Its share price, however, plunged as much as 15 per cent in Hong Kong trading a day after it was blacklisted by the US.
The company issued a statement on Monday (18 January) to clarify that “it is not owned, controlled or affiliated with the Chinese military”.
Xiaomi further stressed that it is not a “Communist Chinese Military Company” defined under the National Defense Authorisation Act (NDAA).
“Xiaomi Corp has been in compliance with law and operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses,” it argued.
Reiterating that it provides products and services for civilian and commercial use, Xiaomi noted that it will take the “appropriate course of actions” to protect the interests of the company and its shareholders.
“The company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the Group,” it noted, adding that it will make further announcements when appropriate.
Meanwhile, Xiaomi’s stock price climbed to HK$32.2 at 10.30am on Tuesday (19 January), higher than its closing price at HK$29.3 last Friday (15 January).
Market Watch‘s chart indicated Xiaomi’s share price continued to surge on Wednesday morning, with a 1.75 per cent increase at price HK$31.950 at 11am.