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Why The9 Limited, Pinduoduo, and Luokung Tech Stocks All Crashed Today

By Rich Smith - May 10, 2021 at 2:45PM

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Investors weigh worries over Chinese sanctions.

What happened

Chinese stocks are in a funk Monday, with shares of popular online gamer The9 Limited (NCTY 9.15%) down 10.3%, e-commerce platform Pinduoduo (PDD -0.15%) falling 12.5%, and location tracker Luokung Technology (LKCO -0.98%) sliding most of all -- off 13.8% as of 11 :15 a.m. EDT.

Blame the Biden administration -- but also the Trump administration -- for that.

Stock market chart superimposed on a Chinese flag

Image source: Getty Images.

So what

As Bloomberg reported over the weekend, restrictions on investment by U.S. companies in Chinese tech stocks, initially proposed by the Trump administration in 2019, are still being considered by the Biden administration. Last week, three of China's biggest telecom companies -- China MobileChina Telecom, and China Unicom -- warned investors that they were on the cusp of delisting from the New York Stock Exchange because of the restrictions. And now investors are wondering when the next shoe might drop.  

After all, the U.S. government remains concerned over Chinese military moves in the South China Sea, in addition to long-standing concerns over human rights violations in China, violations of U.S. companies' intellectual property rights, and hacking of U.S. servers. The Biden administration is reportedly still considering how best to respond, and how far to go in sanctioning Chinese tech firms for the actions of their government. Some of the options under consideration include continued "blacklisting" of technology sales to Chinese tech companies, as well as potential delisting of the stocks of even more Chinese companies that fail to comply with U.S. requirements for auditing of corporate financials.

Now what

There's a lot of confusion as to what, exactly, is going on in this regard, though -- confusion not helped by the fact that both the U.S. "Treasury Department and the National Security Council declined to comment," reports Bloomberg.  

Of course, the stock market famously hates uncertainty -- but what it may hate even more is uncertainty with a side of bias to the negative. As Bloomberg observes, there's "broad support in Congress for a tough stance on China," with Sen. Marco Rubio, for example, saying that "it is commonsense that U.S. dollars should not flow to entities close to the Chinese Communist Party's military."

Until the Biden administration makes up its mind what (if anything) it intends to do about that problem, you should probably expect continued uncertainty in the market -- and continued volatility among Chinese stocks.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The9 Limited Stock Quote
The9 Limited
NCTY
$1.55 (9.15%) $0.13
Pinduoduo Stock Quote
Pinduoduo
PDD
$47.26 (-0.15%) $0.07
Luokung Technology Corp. Stock Quote
Luokung Technology Corp.
LKCO
$0.24 (-0.98%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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