Chinese stocks are down across the board a day after ride-hailing company DiDi (NYSE:DIDI) announced plans to delist from the New York Stock Exchange and as regulators in Beijing impose new restrictions on livestreaming.
Shares of major companies such as Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and JD.com (NASDAQ:JD) are each down 2% or more today. Why? It seems spooked investors are assessing the implications of DIDI stock’s delisting plans and the prospect that China’s crackdown on public companies, and technology stocks in particular, might be continuing.
What Happened With Chinese Stocks
Yesterday, DiDi announced that it will hold a shareholder meeting on May 23 so that they can vote on a delisting proposal. That news sent DIDI stock down 20% on the day, pushing its decline since going public last July to 86%. DiDi Global shares now trade at $2 each.
At the same time, media reports out of China indicate that authorities in Beijing are taking steps to ban the livestreaming of unauthorized video games, a move that signals a broader crackdown on the entire gaming industry. Taken together, news of DIDI stock’s delisting and the enhanced restrictions on the gaming industry have investors reevaluating the risks of owning Chinese stocks.
Why It Matters
Chinese stocks have been under pressure for more than a year, since regulators in the country began cracking down on public companies with a particular focus on Big Tech. Over the past 18 months, Chinese authorities have issued record antitrust fines, canceled planned initial public offerings and banned cryptocurrency mining.
The crackdown has called into question the future of major Chinese technology stocks, many of which are seen as global leaders in areas such as e-commerce, cloud computing and artificial intelligence. The turmoil has also raised concerns that many leading Chinese stocks could withdraw their listings on U.S. exchanges, an issue that has been exacerbated by DiDi Global’s planned delisting from the NYSE.
Leading Chinese stocks such as BABA and BIDU have fallen more than 40% over the past 12 months.
What’s Next
The turmoil in Chinese stocks looks set to continue as regulators continue to restrict technology use and as DiDi Global prepares to exit its listing in New York. How long the downturn in Chinese stocks lasts remains unknown, but given the continued declines, investors should be careful with any securities of companies based in mainland China.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
