What happened
Shares of Baidu Inc. (BIDU 1.81%) plummeted today as investors feared that the China-based tech giant may receive increased oversight from Chinese regulators, in addition to threats from the U.S. about potential delistings of foreign stocks.
The tech stock fell by 13.4% today.
So what
Investors have grown jittery about Chinese technology stocks recently for a couple of reasons. First, the U.S. Securities and Exchange Commission (SEC) has threatened to kick foreign companies off of U.S. exchanges if they don't adhere to U.S. auditing practices.
Image source: Getty Images.
Under the Holding Foreign Companies Accountable (HFCA) Act, established by the Trump administration, foreign companies could potentially be delisted from American exchanges if they don't comply with U.S. auditing standards for three consecutive years.
The increasing tension between the U.S. and China has put some investors on edge, and any talk of potential delisting of stocks is enough to make investors uneasy.
Making matters worse for Baidu's stock 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 may set up a joint venture between Chinese tech companies and the government to oversee user data.
Now what
Investors can likely expect more volatility from Baidu and other Chinese stocks in the near term. As the Chinese government expands its oversight of local technology companies -- and as U.S. regulators become increasingly skeptical of Chinese auditing practices -- investors are sure to exit at least some of their positions in China-based tech stocks right now.
