Xiaomi shares surge 13 percent after lackluster first day of trade

  • Xiaomi shares surged over 13 percent on the company's second day of trade after its initial public offering.
  • The share price rise came after news that the Chinese firm will be included in the Hang Seng Index.
  • Xiaomi shares dipped Monday after the company went public on concerns over its business model.
Isaac Lawrence | AFP | Getty Images 

Shares of Chinese electronics-maker Xiaomi surged over 13 percent Tuesday on just its second day of trade following its initial public offering (IPO).

Xiaomi shares closed at 19 Hong Kong dollars ($2.17), above its IPO price of 17 Hong Kong dollars. The rise is a welcome boost for the world's fourth-largest smartphone maker, which went public Monday and saw its shares fall.

The share price surge came after the company behind the Hang Seng Index, which includes companies like Tencent and China Mobile, said Monday that it would include Xiaomi as one of the constituents on July 23.

It's a big move that will allow mainland Chinese investors to buy shares of Xiaomi, which is listed in Hong Kong, through the Stock Connect program.

Xiaomi was initially going to list part of its shares on the mainland via China depositary receipts (CDRs), but the company postponed those plans. This was seen as one reason why Xiaomi's valuation ended up being around $54 billion when it came to market, rather than a previous figure of nearer to $100 billion that was floated in the months leading up to the IPO.

The muted start to life as a public company was attributed to a number of factors, including worries over Xiaomi's reliance on selling hardware and its ability to scale internationally.