(Yicai) Aug. 26 -- Midea Group, the world's biggest maker of home appliances, has pared its stake in Chinese electronics giant Xiaomi to raise funds for its ongoing overseas expansion, according to investment industry experts, who noted that it is a normal part of corporate activity.

The development of Midea's overseas business needs funding, which is also why the company is seeking to go public in Hong Kong, said Lin Jiayi, general manager of Guangzhou Xuanjia Private Equity Fund Management. The sale was also relatively well timed, as Xiaomi’s valuation is much higher than many of its peers, Lin added.

Midea sold CNY700 million (USD98.3 million) of Xiaomi stock in the first half of this year, with its remaining stake worth CNY193 million as of the end of June. It first bought Xiaomi shares in 2015 before selling some in 2020 and again last year.

The shares are purely a financial investment for Midea, according to Hu Kunchao, an investment manager at Guangdong Cheese Investment Fund. With their price continuously rising, selling the stock to lock in profits is normal, Hu added.

The losses at Xiaomi's auto business could bring some uncertainty to its operations, so Foshan-based Midea may also have sold the shares to mitigate any potential investment risk, Hu noted.

Xiaomi's smart electric vehicle and other new initiatives segment had an adjusted net loss of CNY1.8 billion (USD250 million) in the second quarter, the company's first unaudited earnings report since starting car deliveries showed on Aug. 21. It handed over 27,307 EVs, which works out at at a more than CNY60,000 (USD8,425) loss per vehicle.

From a business perspective, Midea has invested in smart homes, robotics, automation systems, and other areas, Hu said. The share sale could be part of a wider strategic shift to focus on its core business or explore new business opportunities, Hu added.

The divestment by Midea does not affect Xiaomi's fundamentals, Lin pointed out, adding that it merely indicates that the market has relatively fully priced the Beijing-based company at this point.

Editor: Martin Kadiev