- US-listed Chinese stocks, including Alibaba and Baidu, are falling on Monday as investors rethink their positions.
- This comes after the Securities and Exchange Commission identified five U.S.-registered ADRs from Chinese companies that did not comply with the Foreign Company Liability Act.
China’s economic headwinds and a slowdown in retail sales growth could weigh on Alibaba’s second-quarter earnings when it releases numbers on Thursday.
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U.S.-listed Chinese stocks tumble on Monday as investors reevaluate their positions amid renewed delisting concerns.
Last week, the Securities and Exchange Commission identified five U.S.-registered ADRs from Chinese companies that did not comply with the Foreign Company Liability Act, causing shares of some Chinese companies to drop. ADRs are shares of non-US firms traded on US exchanges.
The law allows the SEC to delist and even ban companies from trading on U.S. exchanges if regulators fail to review company audits for three consecutive years. The list includes Yum China, BeiGene and Zai Lab, which recently filed their annual returns with the agency.
Shares of major companies including Alibaba, Baidu and JD.com fell more than 9%, 12% and 10% respectively on Monday. Alibaba shares fell 12% last week and are down 27% year-to-date, while Baidu is down 14% and down 20% year-to-date.
Analysts at JPMorgan Chase downgraded JD.com, Alibaba and Pinduoduo on Monday amid selloffs.
“Due to rising geopolitical and macroeconomic risks, we believe that a large number of global investors are in the process of reducing their exposure to the Chinese Internet sector, leading to a significant outflow of funds from this sector,” the analysts wrote. “We believe Alibaba, as one of the most widely held stocks in China’s internet sector, will face selling pressure in the near future.”
The Chinese market as a whole fell amid a new Covid-19 lockdown in Shenzhen, where many of the country’s tech giants operate. Foxconn, one of Apple’s largest suppliers, shut down operations in response. Apple shares fell almost 2% in premarket trading on Monday.
Some investors are also beginning to weigh the implications of China’s possible involvement in the war in Ukraine after several news outlets, including the Financial Times, reported that US officials said Russia may have asked China for military assistance.
– Bob Pisani of CNBC and Eustans Huang contributed to this report.