Chinese stocks are red hot, and three of the hottest stocks of late are in the small-cap segment of the Chinese market. How hot are we talking about? Well, how about recent gains of 26%, 28% and 59% — in just the past five sessions.
Oh, have I got your attention now?
The potential for big gains in Chinese small caps is something I’ve been expecting, and I recently wrote about some of the factors that are likely to keep Chinese stocks powering higher for the rest of the year. Many of these factors — the Shanghai-to-Hong Kong convergence trade, low relative valuations and the promise of government stimulus to keep China’s domestic market growing — all are tailwinds for small-cap Chinese stocks, as traders continue to pile into many names that are little-known to mainstream U.S. investors.
Yet for traders and/or investors looking to ride a distinct momentum wave for short-term gains, now is the time to check out Chinese small caps along with all of the fast money pouring into the space. So, which companies actually are putting in those aforementioned massive gains?
Here are three hot stocks in the Chinese small-cap segment that you should chase right now:
Hot Stocks #1 — China Mobile Games and Entertainment Group Limited
China Mobile Games and Entertainment Group Limited (CMGE) is one of the hot stocks in the Chinese small-cap space that cater to one of the hottest sectors of the Chinese equity market — technology. In particular, CMGE is the maker of social media games designed for use on mobile platforms.
That business in general has witnessed explosive growth, hence the nearly 500% year-over-year revenue growth in CMGE’s most-recent quarter. As the largest publisher and one of the top game developers in China, CMGE is positioned perfectly to continue growing. CMGE is also likely to continue to build on its recent 30% share price surge over the past month.
Hot Stocks #2 — China Finance Online Co.
Similar to CMGE, China Finance Online Co. (JRJC) is a technology company that offers its services to Internet users. In the case of JRJC, the website is aimed at stock traders. Last week, the company went live with its web-based trading platforms named Zhengquantong and Securities Master. The latter platform was launched as part of China Finance’s partnership with China’s biggest brokerage firm, CITIC.
Traders really liked the new trading platforms, at least as reflected in the value of JRJC shares. Over the past month, shares are up an incredible 115% — a huge jump, even for hot Chinese stocks. And while a gain this big certainly isn’t sustainable over the long term, the momentum in JRJC remains, and that means now is the time to jump in.
Hot Stocks #3 — China HGS Real Estate Inc.
Given all of the fear-oriented headlines about so-called “ghost cities” and property bubbles in China, you wouldn’t expect to see a company that that develops, constructs and sells residential apartments and commercial properties to see its share price surge 233% in just three weeks. Yet that’s exactly what’s happened with China HGS Real Estate (HGSH).
In fact, HGSH shares were up more than 14% on heavy trading volume in Tuesday, Aug. 26 trading. While there wasn’t any headline catalyst driving the stock higher Tuesday, HGSH has benefit mightily after the early August release of its fiscal third-quarter earnings. Earnings per share were up 260% year-over-year on surging revenues.
Once again, the gains in HGSH aren’t likely sustainable, but if you are a momentum player looking for big gains fast, hot stocks such as these three small-cap Chinese stocks are a great place to start your search.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.