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US urges caution for investors amid China’s corporate crackdown | Financial Markets News

The Nasdaq Golden Dragon China Index, which tracks 98 of the largest Chinese companies listed in the United States, plunged on Tuesday after Chinese regulators released draft rules to prevent unfair competition online.

Chinese stocks listed in the United States are facing a new wave of selling pressure as authorities in Beijing step up their crackdown on some of the country’s largest companies.

The Nasdaq Golden Dragon China Index – which tracks 98 of the largest Chinese companies listed in the United States – plunged 4.5% on Tuesday after China’s State Administration for Market Regulation released draft rules aimed at preventing unfair competition online.

The announcement came just hours after the state-backed People’s Daily newspaper published a comment saying China would increase oversight of the entertainment industry and what it called “idol culture.” .

The measures are the latest in a series of announcements that have shaken investor confidence as Chinese regulators attempt to subdue the country’s tech titans.

“This definitely creates a tough investment environment going forward,” said Michael O’Rourke, chief market strategist at JonesTrading. “Investors really need to be careful,” he added.

377502611 US urges caution for investors amid China’s corporate crackdown | Financial Markets News

U.S. Securities and Exchange Commission Chairman Gary Gensler issued his most blunt warning to date on the risks of investing in Chinese companies on Monday. He asked SEC staff to take “a break for now” to approve IPOs of shell companies that Chinese companies use to list their shares in the United States.

Tuesday’s crisis is led by tech giants including Alibaba Group Holding Ltd., JD.com Inc. and Baidu Inc., all of which are down at least 3%.

The sell-off comes on top of what has been a brutal six-month period for Chinese stocks in the United States, as the Nasdaq Golden Dragon China index has fallen more than 50% since reaching an all-time high in February . Along the way, some of the world’s most prolific investors have started to jump ship.

Cathie Wood’s flagship Ark Innovation ETF reduced its exposure to equities of companies in the world’s second-largest economy to zero after reaching 8% of its assets in February.

Meanwhile, Paul Marshall, co-founder of the $ 59 billion hedge fund Marshall Wace, said in a letter to clients last week that people could argue that Chinese stocks listed in the United States have become “no. investable ”.

Other major funds have joined the exodus, with documents filed with the SEC showing that Soros Fund Management, D1 Capital Partners and Soroban Capital Partners each left some or all of their holdings of U.S. certificates of deposit of Chinese companies in the past. during the second trimester.

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