Xiaomi vs. Tencent: Both are relatively strong—whose warrant strategy is clearer?

Two major tech stocks are both trending upward today, but their short-term risk-reward ratios and product structures actually differ significantly.

Xiaomi Tencent

Closing Price HK$26.04 HK$456.20

Short-Term Risk-Reward Ratio 69.6 pts 61.7 pts

First Support Level HK$25.24 HK$447.08

Second Support Level HK$24.48 HK$433.39

First Resistance Level HK$26.56 HK$465.32

Second Resistance Level HK$27.36 HK$479.28

Looking solely at the risk-reward ratio, Xiaomi $XIAOMI-W (01810.HK)$ leads Tencent with a score of 69.6 $TENCENT (00700.HK)$ versus Tencent's 61.7. However, both share one commonality: their current prices are already approaching the first level of resistance.

Xiaomi is less than approximately 2% away from HK$26.56, while Tencent is also only about 2% below HK$465.32. Therefore, both stocks must now demonstrate their ability to break through resistance, rather than relying solely on their currently stronger-than-average scores.

Call Warrants: Xiaomi’s leverage is comparable to Tencent’s, but their degrees of moneyness differ.

Representative call warrants for Xiaomi include:

UBS Group 14455: 7.5% out-of-the-money, 4.6x leverage, 47.5% implied volatility

Guojun 14448: 5.2% in-the-money, 4.1x leverage, 45.3% implied volatility

Macquarie 14495: 10.9% out-of-the-money, 4.5x leverage, 51.0% implied volatility

For Tencent:

UBS Group 13634: 5.4% out-of-the-money, 4.7x leverage, 37.1% implied volatility

BNP Paribas 13915: 5.2% out-of-the-money, 4.2x leverage, implied volatility 41.9%

UBS Group 27993: 9.7% out-of-the-money, 4.5x leverage, implied volatility 35.6%

Both sides’ call warrants have leverage concentrated around 4x to 5x, but Xiaomi’s implied volatility is generally above 45%, while Tencent’s ranges from approximately 36% to 42%.

This indicates that although Xiaomi offers higher reward potential, its products are relatively more expensive. If Xiaomi only rises from HK$26.04 to around HK$26.56 without further breakout, deeper out-of-the-money calls may not fully reflect the underlying stock’s relative strength.

Tencent has a slightly lower short-term rating, but its near-the-money calls have relatively moderate implied volatility and simpler terms. Judging purely by call structure, Tencent may not be at a disadvantage.

Bull certificates: Tencent offers higher leverage, while Xiaomi’s knock-in level is closer to support.

Xiaomi bull certificates:

UBS Group 57358: Knock-in price HK$23.50, 9.8% below current price, 8.4x leverage

BNP Paribas 53415: Knock-in price HK$23.00, 11.7% below current price, 7x leverage

Tencent bull certificates:

UBS Group 69216: Knock-in price at HK$420, 7.9% below current price, leverage of 10.3x

HSBC 69838: Knock-in price at HK$420, 7.9% below current price, leverage of 10x

Tencent's knock-in price of HK$420 is below the second support level at HK$433.39, offering one layer of technical buffer, but leverage has already reached approximately 10x. Suitable for traders with a clear directional view who can tolerate intraday volatility.

Xiaomi’s knock-in prices at HK$23.5 and HK$23 are also below the second support level at HK$24.48, providing a relatively intact buffer, while leverage drops to 7–8.4x. Overall, it is less sensitive than Tencent’s bull certificates and better suited for investors who prefer products not overly affected by normal market fluctuations.

How to choose?

If comparing only short-term momentum of the underlying stocks, Xiaomi currently has the edge.

If comparing call warrants based on implied volatility and proximity to spot price, Tencent’s terms are relatively easier to manage.

When comparing bull certificates, Xiaomi offers lower leverage and a wider buffer; Tencent provides higher leverage but demands more precise timing for entry.

Therefore, we wouldn’t simply say 'a score of 69.6 is definitely better than 61.7.' A more practical understanding is:

Xiaomi: Higher reward potential in the underlying stock, but its call warrants also carry higher implied volatility.

Tencent: The underlying stock shows slightly weaker momentum, but its near-the-money products offer more balanced terms.

The real value of a product overview lies in enabling separate comparisons between the strength of the underlying stock and the product terms. Picking the right stock only gets you halfway there; the other half is selecting a product that aligns with your holding period and volatility tolerance.

Between Xiaomi and Tencent, which one are you paying closer attention to recently?

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