Source: Securities Times Author: Roman
On December 28, Hong Kong stocks once again saw a number of plummeting stocks.$SUPER STRONG (08262.HK)$After a sharp drop of 94% yesterday, trading was suspended for a short time. After resuming trading today, the closing decline reached 39.53%, at HK$0.052 per share, with a total market value of HK$41.38 million;$KIDZTECH (06918.HK)$It fell 90% yesterday, and today it fell more than 28% in the intraday period, closing down 12.4% to HK$0.219/share, with a total market value of HK$140 million;$DREAMEAST (00593.HK)$Yesterday's decline was 87.14%, and today's intraday decline was more than 40%, closing down 24.53% to HK$0.2 per share, with a total market value of HK$57.1 million;$YESTAR HEALTH (02393.HK)$It fell 55.93% yesterday, and fell 66.67% today. The total market value was HK$60.62 million, and the stock price was HK$0.026 per share, a new low since listing.
All of these individual stocks that have plummeted have an obvious characteristic, that is, the stock price rose sharply and there was a wave of strong increases before the sharp fall. For example, from July to December 22, the cumulative increase in stock prices reached 468.18%, rising nearly 5 times in 5 months. Since September until December 22, the cumulative stock price increase of Hongqiang Holdings has reached 921.43%, with a cumulative increase of nearly 10 times in 3 months.
The sharp rise and fall in stock prices, combined with the small total market capitalization, inevitably made the market doubt the “volume” of these individual stocks.
A number of Hong Kong stocks have bizarrely plummeted
According to Wind data, from yesterday to today's close, Hongqiang Holdings's cumulative decline reached 96.36%. It is worth mentioning that after the sharp drop yesterday, Hongqiang Holdings briefly suspended trading at 11:24 a.m. on the same day, and announced that after inquiring about the relevant situation, the board of directors confirmed that it was unaware of any other reasons for related price fluctuations or any information that needed to be disclosed.
From December 27 to today's close, the cumulative decline in Qishida's stock price reached 91.24%. Prior to the sharp decline, Qishida's stock price had accumulated a cumulative increase of nearly 5 times from July to December 22. Also, when stock prices began to rise, Qishida announced on July 26 that it plans to place up to 104 million shares to no less than 6 independent institutions, professional or individual investors, at HK$0.35 per share. Qishida stated that the net proceeds (after deducting placement commissions and other related expenses) would be approximately HK$35.94 million.
On August 23, 2023, Kishida completed the placement of a total of 104 million shares. It was successfully placed to no less than six undertakers at a placement price of HK$0.35 per share. The placement issue price was discounted by 68.8% from the previous day's market value.
“On the 27th, Kistar reached a trading volume of 208 million shares. If you take a close look at Kishida's brokerage seats, you'll find that the stock concentration is very high. The top ten brokerage seats already hold 77.33%, and the top 20 brokerage seats already hold about 90% of the shares. It can only be operated by large investors; retail investors have no ability to do this.” A local Hong Kong brokerage analyst told reporters.
Dream Oriental and Superstar Medical Holdings had cumulative declines of 90.29% and 85.31% respectively for two consecutive days. Also, those that have been on the market for less than two months$HUASHI GROUP (01111.HK)$It is a brand, advertising and marketing service provider located in Hubei Province. It was listed in mid-November this year. The listing price was HK$1.04, and the net capital raised was approximately HK$72.1 million. The stock closed at HK$1.62 on the first day, up 55.8% from the issue price. After reaching an all-time high of HK$2.39 in late November, the stock has remained at around HK$2.2. It has fallen sharply continuously in recent days. It plummeted by more than 20% on December 21, more than 40% on December 22, and plummeted 50% on December 27. It once fell by about 20% during the intraday session and turned red at the end of the session.
Why are there so many Hong Kong stocks
Generally speaking, individual stocks with a stock price below HK$1 are dubbed “fairy stocks.” Fairy stocks have long been a “specialty” of the Hong Kong market. These stocks generally have characteristics such as poor performance, small market capitalization, detailed stock prices, low trading volume, high concentration of shares, frequent capital operations, no dividends all year round, and inexplicable sharp rises and falls.
Wind statistics show that on December 28, a total of 1,561 out of 2,621 Hong Kong stocks had a share price of less than HK$1, accounting for 60%. The number of individual stocks with daily turnover of less than HK$50,000 reached 1,237, accounting for 47%.
Hong Hao, chief analyst at Sirui Group, said, “A large number of fairy stocks have been created under the Hong Kong registration system, and fairy stocks are a breeding ground for Zhuang stocks to grow. Our calculations show that in this market with a total market capitalization of HK$31 trillion, retail investors can suffer tens of billions of dollars every year due to “capital operation” methods such as allotments, share offers, and joint shares. This figure seems to be only one-thousandth of the total market value, but it is enough to explain the lack of the market.”
How to protect against lightning?
Shell stocks, old stocks, and suspended stocks can be described as a “specialty” of the Hong Kong Stock Exchange. Investors can identify stocks from the following 6 aspects to avoid stepping on lightning. Investors should never have a sense of luck.
1. Fundamentals, avoid buying companies with too little market value, long-term losses, or no long-term net cash flow inflow.
2. Comparing the ratio of stock price to net asset value, net asset value is the value that shareholders can take back after the company is liquidated. If the stock price is too high compared to the net asset value, the risk is relatively high.
3. Pay attention to the risk of equity concentration. Investors can determine the degree of concentration of shares in CCASS as disclosed by the Hong Kong Stock Exchange. If the majority shareholders place most of their shares in the same brokerage firm, they may have pledged their shares, and there is a possibility that stocks will plummet due to position cuts. At the same time, you can observe the “Highly Concentrated Shareholding Announcement” on the Securities Regulatory Commission's website.
4. If the share trading price difference is large, circulation is low, and the stock price rises abnormally outside of fundamentals. For example, there is no breakthrough in the company's business, but the stock price rises almost every day, and is out of sync with the general market and industry trends for a long period of time, or if the daily fluctuation of the stock price remains within a specific range for a long period of time, it is likely that the bookmaker is speculating.
5. At the beginning of the rise in bookmaker stocks, there were often not many transactions, because in the beginning, transactions were made with the left hand and right hand within the bookmaker. Later, good news may be used to push up the stock price. Stock prices usually rise abnormally on the eve of a sharp drop, and trading volume suddenly surges, and bookmakers take the opportunity to ship. At the same time, it is also necessary to watch out for a certain price to have a very large amount of trading volume at some time during the opening of the market.
6. Avoid buying companies that regularly use financial technology, such as frequent name changes, allotment of shares, joint shares, etc. Because on the eve of every allotment or sale, the majority shareholders must also deposit physical shares into the brokerage firm. If they find that the stock price has been rising for a while, and suddenly a large amount of physical stock is deposited in the brokerage firm, then there is a very big chance that they are ready to sell or distribute shares.
edit/lambor