Can We Trust Baidu, Dangdang, Youku, and SINA?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Today's been a bad day for China's leading Internet stocks. Shares of Baidu (NASDAQ: BIDU  ) , E-Commerce China Dangdang (NYSE: DANG  ) , Youku Tudou (NYSE: YOKU  ) , and SINA (NASDAQ: SINA  ) opened between 3% and 6% lower this morning after an SEC decision that may make it harder for them to square away a reputable auditor down the line. 

Fed up with accounting shenanigans at small Chinese ADRs, a judge is suspending the Chinese units of the Big Four accounting firms from auditing U.S.-listed companies for six months. If it sticks, this will naturally make it harder for ADRs to publish audited financials. 

The SEC administrative law judge made the extreme ruling after the firms refused to provide audit papers to stateside regulators investigating potential fraud in Chinese companies. The firms argue that doing so would violate Chinese law, and, naturally, they will be appealing the unappealing decision.

However, the market hates uncertainty, sending shares of many of the leading U.S.-listed Chinese speedsters lower.

The rub here is that these aren't fly-by-night companies. Baidu is the company behind China's leading search engine, commanding a nearly $60 billion market cap. Dangdang is China's leading online seller of books. It's the smallest of the four companies, and that may explain why it also took the hardest hit by trading as much as 13% lower early in the day. Youku completed its merger with Tudou a couple of years ago, combining two of the country's leading streaming video companies to create the undisputed top dog in the niche. SINA is one of the market's longest-trading Chinese Internet stocks, but the parent company of the Twitter-esque Sina Weibo couldn't escape the wrath of concerned investors.

Perfect! This is a good buying opportunity for those that have been looking to get into some of China's leading Internet companies. Whether the Chinese firms cave in to the documentation requests or are successful in their appeals, does anyone really think that Baidu and its smaller peers will go dark on stateside exchanges? The situation isn't trivial, but it's far more likely that some form of resolution will save the day than not. 

Investors buying into China's growth stocks know that there are inherent political and regulatory risks. This is just another reminder. However, since these four companies aren't being accused of accounting shenanigans themselves, it seems as if today's sell-off is more than a bit overblown. Quality growth stocks bounce back, and these stocks will likely do exactly that.

Hitting the road for even more growth opportunities in China
U.S. automakers boomed after WWII, but the coming boom in the Chinese auto market will put that surge to shame! As Chinese consumers grow richer, savvy investors can take advantage of this once-in-a-lifetime opportunity with the help from this brand-new Motley Fool report that identifies two automakers to buy for a surging Chinese market. It's completely free -- just click here to gain access.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2806608, ~/Articles/ArticleHandler.aspx, 8/29/2015 8:01:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 22 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
BIDU $152.13 Up +0.07 +0.05%
Baidu CAPS Rating: ****
DANG $6.15 Down -0.21 -3.30%
E-Commerce China D… CAPS Rating: **
SINA $38.74 Down -0.42 -1.07%
Sina CAPS Rating: ***
YOKU $17.61 Up +0.02 +0.11% Inc. CAPS Rating: *