Investors with an eye to big trading profits love small-cap stocks. They move rapidly, often generating outsized trading gains - and losses. Small-cap stocks are often priced in the pennies, so one board lot can be easily affordable. The stocks are simply exciting to own. But the stocks are also opaque. There is little or no research on the securities, and they are rarely discussed in mainstream media. Their share prices lurch up and down in dramatic fashion, and shareholders often have little clue why. The lightly monitored, thinly traded small-cap sector is also prone to manipulation. One practice known as share-price ramping involves investors working in cahoots with a brokerage to drive up prices. Some historical cases have involved misleading brokerage research and circulation of unfounded market rumours. Once the market is worked up to a sufficient frenzy, they sell: the scheme is known as pump and dump. Money Magazine selected a short-list of highly volatile stocks to shed light on the sector. This is not meant as a recommendation to buy these stocks. Rather, it is meant to offer insight into what is going on behind the scenes of some of Hong Kong's most volatile stocks. The companies making it to our list were selected at random, but within general guidelines. We looked for listed companies of market capitalisation ranging from US$500 million to US$2 billion. We screened out the stocks of companies that are thinly traded, and sought to eliminate those which have intangible or hard to understand business models. Our selection includes companies covered by at least one analyst and which appear to have good growth prospects. They are legitimate trades, albeit highly volatile. For those looking for a quick big win and with a taste for drama, we present Hong Kong's top 10 most volatile small-cap stocks with a real business: Honbridge Honbridge has mineral resource investments in Brazil and stakes in a mainland solar-panel maker that also carries out research into silicon technologies with green-energy applications. The company sold its magazine publishing assets, which included the bi-weekly China lifestyle magazine Jessica, in 2011 as part of an effort to focus entirely on mineral resources and alternative energy. In March the company reported a HK$222 million loss for 2012, marking its fifth straight loss-making year. The stock fell 30 per cent in 2012 but is up 61 per cent since the start of 2013. "This penny stock is a typical speculative stock, with high risk relative to any potential positive returns," said Stanley Chik, assistant manager at the research department of a local broker Bright Smart Securities. "The management changes fast and it has never made real money." Wison Engineering Services Wison is China's largest non-government-controlled engineering construction company for the petrochemicals, oil refinery and coal-to-chemical conversion industries. Forbes estimates the net worth of Wison chairman Hua Bangsong at US$1.2 billion. Wison raised US$154 million in a share listing on the Hong Kong exchange in December. In the year to date, the shares have risen 32 per cent. In March, the company reported a net profit of 467 million yuan (HK$578 million), a drop of 10 per cent from 2011. Citi analyst Oscar Yee rates the stock as a buy, saying a robust order backlog was likely to help drive a profit recovery this year. Hanergy Solar Group Hanergy, a solar-panel maker, reported a 2012 net profit of HK$1.32 billion. The result compares to a HK$719 million profit a year earlier. The company's shares are up 34 per cent so far this year, adding to a 23 per cent gain in 2012. A local fund manger who declined to be named said retail investors were keen on this stock due to its solar theme. Renhe Commercial The mainland shopping centre operator Renhe Commercial reported an 895 million yuan net profit in 2012, compared to 5.27 billion yuan a year earlier. The company, which specialises in converting underground bomb shelters into shopping arcades, manages 22 shopping malls in 15 mainland China cities. Fourteen projects are under construction, according to Renhe's 2012 interim results statement. Kenny Tang, general manager with AMTD Financial Planning, said investors should be wary. "Even if it could make a profit, it has negative cash flow due to high capital expenditure," he said. Renhe's shares tumbled 43 per cent in the first quarter. Honghua and Anton Oilfield Services Honghua and Anton are potential beneficiaries of the development of China's shale gas industry. Anton is a provider of oil and gas field development services to energy companies, while Honghua is a supplier of heavy drilling equipment. Schlumberger, a major US shale gas drilling service provider, bought a 20.1 per cent stake in Anton for about US$80 million last year. China trails the US in terms of bringing shale gas fields into commercial production, but a major ramp up of production is expected by 2015. But analysts advise investors to exercise caution before piling into shale gas-related themes. "There are few firms on a shale gas theme that investors feel excited about," says an analyst who declined to be named. "China's shale gas development is at least a 10-year story - it cannot translate into profit contribution soon." China Datang Corporation Renewable Power Wind power producer Datang International Power Generation ranks among favoured investment themes in the first quarter. Investors took a shine to the sector after Beijing announced early this year more details on plans to link wind farms in northeastern China to a smart-power grid that will supply homes and businesses in northern China, including the nation's capital. The move is likely to help resolve problems that have weighed negatively on wind power producers - including electrical generation supply bottlenecks. China Datang ranks as the biggest wind producer by capacity in China's north-eastern provinces. "After the former premier Wen Jiabao warned of excessive capacity in the wind power industry four years ago, it has been less favoured by investors. But recently, with the leadership change, the government seems to have resumed a supportive attitude toward this sector. That makes the investor feel excited," CIMB analyst Keith Li says. Shenzhen International Shenzhen International operates logistics facilities, toll roads and supply chain management services in China's main manufacturing hubs. The company is held, in part, by an investment holding institution controlled by the Shenzhen municipal government and in part by Cheung Kong Holdings. Shenzhen International's shares rose 61 per cent in 2012 and advanced 15 per cent in the first quarter. Kaisa The mainland residential developer Kaisa has announced plans to grow its revenue this year by one third. That growth might be hard to meet during a year when Beijing unveiled policies to cool the housing market. More likely, analysts say, real estate developers will experience flattish revenue growth this year unless the government makes a policy U-turn on housing. "Management of the group is a bit opportunistic. They seem pretty conservative about their growth strategy when they talk to credit analysts, because those people care a lot about their indebtedness. But in front of equity analysts, they become another kind of people. They are ambitious and try to make their own business very growth-driven," says an analyst at a local brokerage who requested to be unnamed. The stock is trading at about a 50 per cent discount to its net asset value, representing 0.6 times book value, compared to an industry average of 0.7 times. Kaisa shares fell nearly 10 per cent during the first quarter. Kaisa has been mainly focused on projects in Guangdong province but more recently extended its scope to include projects in Shanghai, Chengdu and Changsha. In terms of development output, the company is averaging nearly 3 million square metres of residential construction per year, according to a statement on the company's Website. Shenzhen Investment Shares of property developer Shenzhen Investment jumped in January following news it had secured a deal to acquire a land site in Shenzhen from shareholder Shum Yip Group, a move that will significantly boost its land bank in the city. A Jefferies' analyst praised the deal, saying the acquisition, paid for by the issuance of 1.4 billion in new shares, was done at a good price and would help the company's growth prospects. Shenzhen Investment, which is backed by the Shenzhen government, announced in a January stock exchange filing it would pay HK$5.17 billion for the site. Still, other brokers cautioned the company faces an uphill battle to reach their sales growth target this year amid fresh government policies to cool house prices. Shenzhen recently adopted rules that require developers to seek government approval for price hikes of 15 per cent or greater. "The balance sheet is not very outstanding and they have projected a 40 per cent sales growth target this year, which is aggressive," says a local fund manager.