China Smarter Energy (HK: 1004) shares jumped 55% today on the Hong Kong exchange, the largest mover in that market. While this is a small stock and small amounts of trading can move low cap companies the turnover was some 1% of shares outstanding. This is more than just an occasional trade moving the market price. The price movement was also sustained over the day, again indicating that this is a real price move, not just something entirely transient.
The difficulty is in knowing precisely what triggered this movement. For the company does keep pointing out that it's subject, potentially, to a change in the ownership of the major controlling shareholding. This has been going on for some time too by their market announcements. Perhaps one has been found.
China Smarter Energy share price from Hong Kong Exchange
The problem for us out here is that there's no real news feed that we can get our teeth into. Who becomes that controlling shareholder will obviously make a significant difference to the future valuation at China Smarter. But who it might become is something rather shrouded in the mists of language and place differences.
We can't really make an objective decision about valuation because said valuation isn't working on objective criteria. This isn't about profits, cashflows and so on. So, that publicly and clearly available information doesn't help us much in trying to value the company. Not at this stage it doesn't.
Yes, 50% price movements are very interesting, don't we wish we could be on the right side of one of those every day? But when they're being caused by swirling information that we're not wholly informed about that's difficult. The same factor makes it difficult to know what to do about what has just happened. For if we don't know - know that is, not just suspect - what has just happened and why then we can't really trade it either. The other way to put this is that we want to trade when we know more than the market does, not less.
