Alibaba, Baidu drop as SEC says 'significant issues remain' to resolve audit transparency

Robert Way/iStock Editorial via Getty Images

Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), Baidu (NASDAQ:BIDU) and several other Chinese technology stocks dropped on Tuesday after an official with the Securities and Exchange Commission said "significant issues remain" in resolving the lack of transparency on being able to audit Chinese firms.

YJ Fischer, Director, Office of International Affairs, said that the Public Company Accounting Oversight Board, or PCAOB needs access to audit paperwork from Chinese firms and the claim that the audit paperwork cannot be produced because of national security concerns is "questionable at best."

In addition, Fischer noted that although there have been "ongoing and productive discussions" between U.S. and Chinese authorities concerning the audit investigations, time is "quickly running out."

Alibaba (BABA) shares fell more than 6% to $82.07, while JD.com (JD) and Baidu (BIDU) both declined approximately 7.5%.

Other Chinese tech stocks were hit, including NetEase (NTES), iQIYI (IQ), Tencent (OTCPK:TCEHY), Pinduoduo (PDD), Dada Nexus (DADA) and Dingdong (DDL), which all saw declines, including Bilibili (BILI), which declined more than 13%.

Fischer also said that even if a deal was reached between the U.S. and China, it would only be the start towards achieving the PCAOB mandate and some companies could even delist from U.S. exchanges, as DiDi Global (DIDI) is preparing to do.

In March, the PCAOB said any speculation about deal that would prevent hundreds of Chinese companies from being removed from U.S. exchanges was "premature."

A month later, however, China confirmed there were plans to revise the confidentiality rules on overseas listings in an effort to help Chinese companies avoid being delisted in the U.S. The China Securities Regulatory Commission said that the original rules, established in 2009, had become outdated.

Earlier this month, investment firm J.P. Morgan upgraded Alibaba (BABA) and several other Chinese tech stocks, citing an abatement to the "significant uncertainties facing the sector."

Comments

[bong70]

Why is it that when US stocks went into hyper bubble the sec did not jump in and warn investors not to keep buying. but when something good comes out about China in the news the sec is quick to slam it down And play nanny state. it’s like they are worried about loosing top spot. But no matter how hard they try the China train will be to powerful to stop. don’t be fooled by the SECS attempts at suppressing Chinese markets.

[don5774]

I'm all in on China. The FUD has helped me accumulate a portfolio that helps me sleep good at night. Anytime you hear the SEC open their mouth, you know somebody is buying.

[Vantablack]

"In addition, Fischer noted that although there have been "ongoing and productive discussions" between U.S. and Chinese authorities concerning the audit investigations, time is "quickly running out."

We are at the precipice of an economic nuclear disaster but that's what you get when you export production offshore.

China must realize that we are not bluffing and may even look forward to pulling the trigger.

The U.S. economy is already imploding, but that is nothing compared to what will happen to China and the CCP. They will never recover and now we have Japan getting ready for a potential war in the region.

The odds are 70% in favor of China finding a way to back out of it so they can live to fight another day and that means Tesla and DIDI at a huge discount right now.

[Piggybank0626]

People say these Chinese tech stocks are undervalued. It is if you can trust the Chinese government and the company accounting like you trust the US.

[Adream]

@Piggybank0626 last great financial crisis started by trusting US "accounting" though; ~10y later, still the same rating agencies doing their 'due diligence' that you can trust for sure ;)

[Piggybank0626]

@Adream Then why don't you sell all of your US stocks and all in elsewhere?

[Adream]

@Piggybank0626 it's called diversification, didn't say you can trust blindly china or eu.... wirecard comes to mind. But you seems to trust blindly us accounting.... enron comes to mind :D

[vtcomics]

Audit transparency issues on Chinese stocks. Shocker

[MmoneyFHitches]

When audits are successful BABA will run to ATH quickly. Accumulate slowly.

[TastyLaksa]

@MmoneyFHitches Its either you buy 0 Chinese companies or buy some BABA for some china exposure.

[BrianM777]

@TastyLaksa I like DIDI and KC as best for upsized returns.

[Chris1w]

Is anyone even surprised?

[LongGone21]

As I said a week ago, with all the Nasdaq trash finally deflating to its real value, it must be time for another SEC announcement to ensure everything Chinese comes down with it.

And the Sinophobes all say the CCP interferes too much in the markets! LoL...

[MattyHoff]

@LongGone21 everyone else needs to disclose their info. Are you suggesting CCP stocks should be exempt?

[Piggybank0626]

@LongGone21 Dude, this is an investment site. If you want the best output for your propaganda then I'd recommend Facebook.

[Winnertakesall]

Why buy these stocks, if you hit a homerun the CCP will just take the profits. If its not a success you're just stuck with a dog.

With American Tech stocks falling these are even less attractive, as you can buy a comparable company with less risk and not deal with some nonsensical CCP proclamation.

[Chris1w]

@Winnertakesall Agreed. This is a lose lose proposition.

[User 6814221]

U.S. Attorney Chuck Rhoades whispered in my ear that every single Chinese company will be delisted from U.S. exchanges.

[drdphd]

Dont worry. China joe will step in and make us all whole again. Just a transitory phenomenon

[Vanamo]

It's like watching somebody standing on top of a building threatening to jump. Hard to stop watching but ultimately depressing, they almost always have no intention of carrying out the act. The SEC need to fix the corrupt US exchanges first.

[LEE64]

The SEC needs to stop yakking about this and finally do something. These CCP controlled companies haven't permitted independent audits for years.

[Diesel333]

Who gives a Shlt if they are listed in US or not HK will take over as lead and all will be okay in the world. I care about assets controlled, cash held and companies they invest in. What exchange does matter for valuation

[Mollypik]

@Diesel333 Actually it does matter if you compare the trading volume of the US and HK. HK is nothing. HK is just not big enough to swallow all those companies.

[wboz]

@Mollypik It will become big enough if these companies all move there. There will be demand for Chinese stock ownership eventually, unless Chinese economy fails hard in some unforseen way. But you do call out a potential roadblock to it happening.

[fcbergeron]

Wonder which firm on Wall Street is telling the SEC to say this??? Who is buying all those shares? Hey SEC, how about investigating naked shorting or something....

[ErikInvest]

Another fear up and down in chinese stock. Tomorrow will forget.

[Fobe]

What a roller coaster ride. Utter a phrase and 5%+ swings. Delisting coming. Delisting postponed. Geopolitical tension.Think I'll go buy PG. Oh wait, it's trading above its historical norm for PE. Oh, I'll increase my cash position then. Oh wait, inflation will massacre that. Hmmm. Tough market

[rickysahota]

Just more fear mongering

[Sgav]

The issues continue with China names, nothing to see here.

[Benedikt939]

FUD

[mmytacist]

@Benedikt939 BABA will end up on the naughty (de)list, likely after the quarterly report this week. It will trigger more selling by the naive. I am waiting for those $70-range prices again before I start buying