January 12, 2015 (Chinavestor) These are the perils of investing in US listed Chinese stocks. Extreme stock price volatility for short and long term. For the short run, we have one example right now. Bitauto Holding Ltd. (NYSE:BITA), a stock that flirted with $95 last Friday and is down to $75 today. Friday was a big uptick while Monday is a steep decline. It just doesn't make sense! BITA's performance is not just one extreme. How about another auto stock from China, Autohome Inc. (NYSE:ATHM). This Chinese consumer cyclical stock jumped just as big on Friday as BITA and stayed high all day. But the same thing happened to it today as to BITA. Giving up all the gains from Friday and more.
Can average investors find Chinese stocks for rational investors? Sure, it's possible. Take a look at Huaneng Power (NYSE:HNP), China's largest independent power generator. The stock was among the best in 2014 already, and the climb continues. HNP advanced 40% in 2014 and has been trading sideways since January 2, 2015. Low oil and coal prices are primarily responsible for this value stock, a potentially good fit for investors looking for sustainable gains.
We track money flows for major Chinese sectors at Chinavestor. The money flow indicator suggests current run up for Huaneng Power Intl. (NYSE:HNP) is well supported by money flows.
This is in sharp contrast to Bitauto Holding Ltd. (NYSE:BITA) and Autohome Inc. (NYSE:ATHM). These stocks are so extremely volatile that are not fit for most investors. Those seeking high returns, BITA and ATHM may just be perfect. But always, high returns come with high risk. Investors better remember this old cliche when it comes to Chinese stocks.
Price chart for Bitauto Holding Ltd. (NYSE:BITA), January8-12, 2015
Source: Google Finance