The perils of playing at the fringes of Asia's largest exchanges have been laid bare by the last two days of trading.
Several shares lost more than 70% of their value in Hong Kong trade on Thursday, and neither the companies nor any investor who's talking knows why.
The media had to cover this collapse and came up with any number of motives behind the selloff. The bulk of those nightmares proved nothing but bad dreams by Friday as the stocks rebounded.
Property developer Jiayuan International Group was one of the hardest hit on Thursday, with its shares closing down 81%. The small developer is little known even inside China but has a prestigious Hong Kong listing nevertheless.
The bloodshed caused HK$37 billion (US$4.7 billion) in losses all told in Hong Kong as around a dozen companies experienced selloffs of 20% or more in minutes.
Another property developer, Sunshine 100 China Holdings, which saw its shares close down 65%, has one director who overlaps with Jiayuan. So a lot of the suspicion fell on those two suspects.
Speculation swirled that Jiayuan might be struggling to repay a US$350 million bond due this week, prompting a Financial Times story that the "Jiayuan crash underscores China property risks."
The FT dug up Dealogic stats showing that Chinese developers have around US$55 billion in mainland Chinese debt that matures this year.
That is indeed a concern. The cost of raising bonds domestically has been soaring, while the authorities have ensured that overseas markets are off limits. But the Hong Kong stock massacre wasn't restricted to property developers.
Rentian Technology Holdings, variously involved in the Internet of Things, money lending and "investment," fell 73%.
HongDa Financial Holding, which trades materials, rents out cars and lends money, dropped 68%.
Jiayuan stated on its website after the market closed that it had paid off the US$350 million bond. The South China Morning Post found a source to confirm this at the company's creditor.
The SCMP noted that Jiayuan sold US$400 million in bonds in the fourth quarter -- a worry, but unlikely to be the cause of the selloff because they mature in 2020. Indeed, that surely promises short-term liquidity for the company.
Other property market participants cited poor sales at a Jiayuan development in Hong Kong. The company said contracted sales had fallen 31% and sales of tiny "micro flats" at its T Plus project in the distant Hong Kong suburb of Tuen Mun closed early, agents said, after only two flats out of 73 on offer sold.
Many of the flats are smaller than a Hong Kong parking space. But that's nothing new; developers have shifted to "micro" and "nano" flats to make the world's most-expensive property market affordable to first-time buyers and to boost sales amid rising interest rates - and, not coincidentally, to improve profit margins.
But Jiayuan has projects as far-flung as industrial and southern Guangdong Province, Guiyang well on the way to Myanmar, Urumqi between Mongolia and Kazakhstan, and Cambodia. It hardly seems likely that poor sales of some tiny flats in a Hong Kong dormitory town would wipe out 81% of its market capitalization in one day.
That wasn't sufficient motive, so others surfaced. Jiayuan International is a subsidiary that makes up 20% of the sales of the Jiayuan Group, based in Zhejiang Province just south of Shanghai. And the parent company has been caught in a scandal about buying a good placement in a property-company ranking.
Hmmm, maybe that's not a good enough reason to cause the elimination of four-fifths of the company's value, either. Suspicion shifted to the detention of one of Jiayuan's major investors in China.
If that investor had pledged shares, it could be that controlling shareholders were forced to surrender them to demanding banks if they can't pay back loans. The banks, already pressured on liquidity from the central People's Bank of China, would then offload them at no matter what price.
All of these reasons seemed pretty far from the truth when Jiayuan's shares surged as much as 99% on Friday and closed up 75%. Sunshine 100 rose 24%, Rentian Technology climbed 38%, and HongDa Financial Holding recovered 11%.
There was heavy buying by mainland Chinese buyers of Jiayuan's shares in Hong Kong through the Shenzhen-Hong Kong trading link that allows the cross-flow of funds between those two exchanges.
For its part, Jiayuan said it was baffled. It leaves Jiayuan at one-third of its previous market cap, although the company issued a statement that business operations continue as normal and that its financial situation is healthy.
I suspect cross-holdings are to blame, if not outright market manipulation. A major shareholder having to flog stock, potentially to repay bonds or other debt, would cause a sudden descent in a thinly traded stock.
The truth is that there are often webs of smaller companies linked by related co-owners who aren't above deliberately marking up their company's value, then dumping the shares. Other company founders with the best of motives still treat public companies like their own private domain and bank balance. They may not have the most secure finances themselves under all those shadow companies, and if they get detained in China -- something that could happen any moment -- all bets are off.
Investors should avoid anything but the best-known listings in Hong Kong and go near mainland markets at their peril. Penny stocks are likely to leave you a pauper.
And as soon as you start hearing company descriptions that combine wildly different sectors like the Internet of Things, industrial machinery, corner-shop candy stores and oil futures (plus money lending), run!