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Xiaomi surged more than 10% a day after its disappointing debut, as investors began to pile into the world’s third-largest listed smartphone maker. The Chinese company surged to a high of HK$18.56, well above its HK$17 initial public offering price. About 280-million shares changed hands before the lunch break, versus 462-million shares on Monday. The rebound more than made up for the worst first-day performance by a $1bn-plus Hong Kong initial public offering (IPO) since 2015. In the long run, Xiaomi needs to convince investors that it is capable of shedding a reliance on cheap phones and becoming an internet giant. The company now faces intense scrutiny while it tries to prove it should be twice as expensive as Apple. It will need to show in future financial results that it can squeeze more profit from nonsmartphone businesses from rice-cookers and scooters and online content and advertising. Xiaomi had priced its IPO at earnings multiples higher than more established tech giants,...

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