Shares in AMTD Digital (NYSE:HKD) stock, the Hong Kong brokerage that was subject to a speculative fervor last summer, are off to the races again.
Shares rose 67% before trading opened on Jan. 5, reportedly on hopes for a reopening of business in China and Hong Kong. China plans to re-open the border between the mainland and Hong Kong, where AMTD is located.
None of that explains the, as of writing, 80% rise in HKD stock.
HKD Stock: a Hong Kong Based Controversy
Watching the pre-market action, speculators at Stocktwits talked up a short squeeze. But we’ve been here before.
HKD stock closed above $930/share last August. Our David Moadel warned investors away back then. While it got another bump in September it opened 2023 at about $10.
AMTD claimed to have a “metaverse” unit called Spidernet and had initial support from the CK Hutchison conglomerate. But that was later disavowed.
Chairman Calvin Choi is controversial. Supporters call him a master of audits. Detractors call him a fraud. The scrutiny was heightened after the August run-up.
Choi also founded the AMTD IDEA Group (NASDAQ:AMTD), which bought the French fashion magazine L’Officiel last year and has been linking Chinese designers to it. There has been no speculative fervor in AMTD stock, which rose overnight in sympathy with other Chinese stocks.
While HKD has 185 million shares listed, only 23.2 million are available for trade. Of those 291,000 were listed as short in mid-December.
What Happens Next?
If you’re going to swim with sharks, know how to get out of the pool. Investors who buy into HKD stock, in other words, need to watch every trade and be prepared to bail at a moment’s notice.
If you’re going to bet on a Chinese re-opening, you’re better off with a legitimate company like Alibaba Group Holding (NASDAQ:BABA).
On the date of publication, Dana Blankenhorn held long positions in BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.