One of China's best-performing stocks this month is a tiny glass company you've never heard of — but nobody seems to know why.
State-owned Luoyang Glass is the best performer in the Shanghai Composite so far this month, up 37 percent as of Wednesday morning. The stock has also hit the 10 percent daily trading limit three times in recent days. The Henan province-based company is rarely more than a blip for investors: Luoyang is worth $1.2 billion, a measly 0.03 percent of the Shanghai Composite's total market cap of more than $4 trillion.
The only thing is, it's unclear why Luoyang's stock is jumping, and even the company says it doesn't know why.
Late Monday, the firm issued a statement telling investors to proceed with caution and to consider fundamentals. The company even warned of weak profitability, just a few days before it's due to report first-half results.
Luoyang, which makes products like sheet and float glass, has alternated annually between profits and losses over the last few years. It's not even a company that many analysts follow: Only one has issued a rating for the company, according to Reuters data.
Still, the recent moves fit into a common pattern in China.
"Retail investors still prefer smaller companies because the momentum for those smaller caps tends to be stronger," said Tony Li, an analyst with China Galaxy International Securities.
Smaller companies with lower market values might mean higher volatility, but that can also translate to better profitability and returns, especially as investors look for creative investment themes in China, Li added.