What happened
Actions of Baidu Inc. (NASDAQ: BIDU) it plummeted today, with investors fearing that the China-based technology giant could receive greater oversight from Chinese regulators, in addition to threats from the US over possible withdrawals from foreign stocks.
The technology stock fell 13.4% today.
And
Investors have been nervous about Chinese technology stocks recently for a number of reasons. First, the U.S. Securities and Exchange Commission (SEC) threatened to expel foreign companies from US exchanges if they did not adhere to US auditing practices.
Image source: Getty Images.
According to the Holding Foreign Companies Accountable (HFCA) Act, established by the Trump administration, foreign companies could be withdrawn from US stock exchanges if they do not meet US auditing standards for three consecutive years.
The growing tension between the U.S. and China has made some investors nervous, and any talk of a potential delisting is enough to upset investors.
To make things worse for Baidu’s stock, there is the fact that the Chinese government is beginning to expand its oversight of large technology companies. The government said earlier this week that it could create a joint venture between Chinese technology companies and the government to oversee user data.
What now
Investors can probably expect more volatility from Baidu and other Chinese stocks in the short term. As the Chinese government expands its oversight of local technology companies – and U.S. regulators become increasingly skeptical of Chinese auditing practices – investors are sure to step out of at least some of their positions in technology stocks. based in China right now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.