By Scott Murdoch and Kane Wu

(Reuters) -SenseTime Group shares rose 1.6% from their initial public offering (IPO) price as they debuted on the Hong Kong Stock Exchange on Thursday.

The Chinese artificial intelligence (AI) start-up raised $740 million in its IPO and priced its shares at HK$3.85 ($0.4937) each, at the bottom of the range flagged, valuing SenseTime at $16.4 billion.

The stock reached HK$4 in early trading, up 3.89%, outpacing the Hang Seng Index that was up just 0.19%.

The firm sold 1.5 billion shares in what was its second attempt to list in Hong Kong in a matter of weeks.

It shelved its first attempt on Dec. 13 after it was placed on an investment blacklist just as the institutional book build for the deal was being concluded.

The U.S. Treasury added SenseTime to a list of “Chinese military-industrial complex companies” on Dec. 10, accusing it of having developed a facial recognition programme to determine ethnicity, with a focus on identifying ethnic Uyghurs.

U.N. experts and rights groups estimate more than a million people, mainly Uyghurs and members of other Muslim minorities, have been detained in recent years in a vast system of camps in China’s far-west region of Xinjiang.

The blacklisting meant U.S investors could not participate in the IPO.

SenseTime relaunched the deal on Dec. 20, but with a higher cornerstone investor stake.

Cornerstone shareholders, all Chinese institutions, bought about 67% of the stock on offer in the IPO, up from the 58% stake flagged in the company’s first attempt.

Institutional investors placed orders for just 1.5 times the amount of stock on sale in the international tranche, regulatory filings with the Hong Kong Stock Exchange show.

Analysts said it was one of the poorest take up rates for a major deal in Hong Kong this year.

The retail oversubscription rate was 5.12 times, which analysts said was also low for a Hong Kong IPO.

“We think the exclusion of U.S. investors from the IPO led to poor international subscription,” said Shifara Samsudeen, LightStream Research analyst who publishes on SmartKarma.

($1 = 7.7981 Hong Kong dollars)

(Reporting by Donny Kwok; Editing by Himani Sarkar)