HONG KONG (AFP, BLOOMBERG) - Shares in Chinese smartphone maker Xiaomi surged more than 10 per cent in Hong Kong on Monday (March 15) after a US judge removed it from a blacklist that barred American companies from investing in it.
The firm's stock price has been hammered since mid-January when former US president Donald Trump, in his last days in office, included it in a group the White House considered a threat to US national security.
The move classified Xiaomi, which is among the biggest smartphone makers in the world, as one of nine "Communist Chinese military companies" that also included state oil giant CNOOC, and popular social media app TikTok.
But US District Judge Rudolph Contreras ruled on Friday that the Department of Defense and the Treasury "have not made the case that the national security interests at stake here are compelling".
He removed Xiaomi from the blacklist and suspended the investment ban after the firm appealed against the blacklisting.
The news sent shares in the firm surging 12 per cent in Hong Kong morning trade on Monday, having lost more than 40 per cent since Trump's order.
However, while Xiaomi was removed, US regulators listed Huawei and ZTE among Chinese telecom equipment makers considered a threat to national security.
Washington claims Huawei has close ties to China's military and that Beijing could use its equipment for espionage - accusations the company denies.
Founded more than a decade ago by billionaire entrepreneur Lei Jun, Xiaomi is the third-largest smartphone manufacturer in the world by volume. In the third quarter, it surpassed Apple in smartphone sales, according to IDC. The company has attracted a suite of American investors from Qualcomm to Vanguard Group and BlackRock, according to data compiled by Bloomberg.
Xiaomi plans to continue to request that the court declare the labeling of its connection to the military as unlawful, and to permanently remove the designation, according to a company statement.
The Xiaomi ruling could pave the way for more more firms to challenge the Trump-era restrictions, with non-state-owned companies like including Huawei Technologies and Semiconductor Manufacturing International Corp (SMIC) standing a better chance of winning a similar lawsuit, according to Jefferies. Shares of SMIC gained as much as 3.3 per cent in Hong Kong on Monday.
"Xiaomi's potential victory could challenge the Defense Secretary's discretion in classifying non-SOEs in China as" Communist Chinese Military Companies, analysts including Edison Lee wrote in a note. "Xiaomi's potential win would likely increase the chances that many of Trump's sanctions on Chinese companies may have to be reversed."