Despite the opacity of China’s economy, small-cap Chinese stocks continue to attract attention, according to Stocktwits, a social platform for investors and traders. “Investors still think they can play this high-stakes game of musical chairs,” Tommy Tranfo, head of community at Stocktwits, told MarketWatch.
Tranfo explained that one of the biggest challenges related to Chinese stocks is working out exactly what is happening in China. “It’s impossible to know what is true coming out of China,” he said. “Any financial news or data that comes out of China has so many grains of salt associated with it that it’s inedible.” Related: Small-cap Chinese stocks spark meme-like buzz Nonetheless, a host of small-cap Chinese stocks, notably TOP Financial Group Ltd.
TOP,
-3.31%,
sparked meme-like attention earlier this year. Shares of the Hong Kong-based trading firm skyrocketed after they proved popular with the WallStreetBets group on Reddit. TOP Financial’s stock has fallen 23.1% in the last three months, while shares of Huadi International Group Co.
HUDI,
-1.11%,
another favorite, have fallen 22.2%. Shares of fellow buzzy Chinese small caps Addentax Group Corp.
ATXG,
-3.53%
and Magic Empire Global Ltd.
MEGL,
-1.68%
have fallen 79.7% and 25.9%, respectively, outpacing the S&P 500 index’s
SPX
decline of 0.8%. But there’s still interest in Chinese stocks, according to Tranfo, who pointed to insurance-technology specialist Cheche Group Inc.’s
CCG,
+31.45%
recent merger with special purpose acquisition company Prime Impact. The combined company began trading on the Nasdaq on Sept. 18, with its stock surging more than 581% that day. Related: Meme stock TOP Financial Group soars more than 890%, spurred on by the Reddit crowd “When our community sees that kind of activity, they raise their eyebrows,” Tranfo said. “The interest [in these stock movements] is coming from traders, more so than investors. People are looking to quick opportunities.” Some investors, however, are taking a long-term approach to certain Chinese stocks. “We have seen really amazing stuff from our community,” Tranfo said, citing the example of coffee chain Luckin Coffee Inc.
LKNCY,
+4.74%,
which had what he called an “incredibly positive” IPO in 2019. Luckin subsequently became been embroiled in a financial misconduct investigation that caused its stock to collapse. …
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LKNCY,
+4.74%,
which had what he called an “incredibly positive” IPO in 2019. Luckin subsequently became been embroiled in a financial misconduct investigation that caused its stock to collapse. …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]