China Tech Stocks Fall Further After U.S. Regulators Flag Delisting Risk

Earlier this week, the company and others including video-streaming platform iQIYI Inc. and social media company Weibo Corp. were added by the U.S. Securities and Exchange Commission to a provisional list of foreign companies that face delisting if they don’t allow American regulators to review their audits for three consecutive years. Chinese laws currently forbid companies from doing so. iQIYI and Weibo don’t trade in Hong Kong.

Other Hong Kong-listed Chinese internet giants followed Baidu’s rout. Alibaba Group Holding Ltd. lost 4.2%, Meituan shed 3.5%, JD.com Inc. was down 3.6% and Bilibili Inc. dropped 6.6%. These companies have not been identified by the SEC in its provisional list but many analysts think they may be eventually added if authorities from the U.S. and China don’t reach a compromise to resolve the two countries’ conflicting rules.

These heavyweights’ losses sent the Hang Seng TECH Index 2.0% lower, taking the benchmark’s year-to-date decline to over 20%.

While Baidu’s inclusion into the list came as no surprise, it was the first major Chinese tech stock to be named by the U.S. regulator. “This time, [Chinese tech giants’] names are being specifically mentioned by the SEC and thus we may still see some knee jerk reaction,” especially given the current fragile investor confidence in the sector after a year-long tech crackdown by Beijing and rising U.S.-China tensions over the Russia-Ukraine war, said UOB Kay Hian analyst Chun Sung Oong.

In response to the SEC’s latest move, the China Securities Regulatory…