Aside from global market concerns, investors are said to have been unsure of Xiaomi's ecosystem story.
Xiaomi shares closed at HK$16.80, having touched a low of HK$16 in early trade, compared to the IPO price of HK$17 per share.
By contrast, China Literature Ltd, the e-book arm of Tencent Holdings, late past year raised $1.1 billion in its Hong Kong IPO amid heavy demand, with the retail portion being 625 times oversubscribed. Others say the ongoing trade war between the USA and China has spooked investors from putting money in Chinese companies. The spat pushed Hong Kong's benchmark index to a nine-month low last week.
51 Credit Card, a Chinese online credit management company, raised HK$1bn ($127 million) from a Hong Kong IPO after pricing it at the bottom of an indicative price range, Thomson Reuters publication IFR reported on Monday.
"In the critical time of a China-U.S. trade war and uncertainties looming over the capital markets, the active participation of investors in our shares subscription shows their confidence on Xiaomi", Lei wrote, counting corporate leaders such as Alibaba Group Holding Ltd.'s Jack Ma, Hong Kong tycoon Li Ka-shing as well as Tencent Holdings Ltd.'s Pony Ma among the investors. It later expanded into computers, TVs and home appliances.
At Monday's closing price the company had a market value of $53.3 billion.
"The market is really concerned about how much growth Xiaomi can generate in 2019, and whether the company can deliver" on what it pitched to investors, said Hao Hong, chief strategist at Hong Kong-based broker BOCOM International.More news: Brett Kavanaugh: 5 Things On Trump’s Supreme Court Justice Nominee
The company, which makes phones to rival Apple's iPhone, had hoped to hit a valuation of $100bn in the float, but is now valued at around $53bn.
"The market environment is getting conservative". There has been a bit of debate as to whether or not it is a hardware company or an internet company, perhaps when the dust settles and investors know what they're getting into we could see the price move in Xiaomi's favour.
Chinese smartphone and telecommunications equipment maker ZTE has been in crisis since the USA government banned American companies from selling it components, citing violations of an earlier deal that punished the company for evading sanctions on Iran and North Korea. Such firms tend to carry far higher valuations than device makers.
"We are an internet company and from Day 1 we have set up a weighted voting rights structure with dual-class shares", he added. It is also the first under the city's new rules permitting dual-class shares, common among US tech firms, in an attempt to attract tech sector floats.
However, Mo Jia (賈沫) of research firm Canalys said the IPO was a "must-go for them even though the current situation is not positive", as Xiaomi would need the cash for an ongoing global expansion as it looks to broaden its scope outside the saturated Chinese smartphone market. The deal was led by CLSA, Goldman Sachs and Morgan Stanley.
Chinese smartphone maker Xiaomi saw its share price fall below the offer price on its first full day as a public company.