What happened

Shares of Chinese e-commerce giant Alibaba (BABA 2.91%), real estate digital transaction platform KE Holdings (BEKE 2.75%), and electronic vaping company RLX Technology (RLX 0.27%) were falling today, down 4.6%, 8.8%, and 8.9%, respectively, as of 12:55 p.m. ET.

These companies didn't report any material news, although earlier this week Alibaba announced the kickoff of China's 11.11 shopping holiday that runs until Nov. 11.

More likely, the declines today were related to ramped-up COVID-19 lockdowns over the past couple days, which are now affecting wide swaths of China. Alibaba's move may have also been related to U.S. peer Amazon.com, following its earnings report that gave tepid guidance for the upcoming quarter, dimming the outlook even further for global e-commerce and cloud computing.

Investors may be returning to a risk-off stance with Chinese stocks, following a brief rebound midweek after Monday's plunge following the Communist Party Congress last weekend.

So what

The Communist Party recently held its once-every-five-years National Congress, at which President Xi Jinping installed loyalists and ideologues over more market-oriented leaders. That sent a chill through financial markets, which view the current regime as hostile to capitalism following the crackdown on tech companies over the past two years and the harsh "zero-COVID" measures taken since March.

Chinese tech stocks plunged following the conference, but then authorities stepped in with some soothing messages on supporting business, especially in the tech sector. Chinese stocks roared back midweek in response, as bargain hunters stepped in.

However, it appears sellers have returned after that brief respite, as China has again locked down dozens of cities over the past two days, amid increasing COVID-19 cases in the country. That's not surprising, given the return of colder weather. According to an analysis by Nomura, this week's lockdowns are affecting nearly 207 million people representing a quarter of the country's GDP.

Doubling down on coronavirus lockdowns isn't what investors wanted to see. Additionally, some large Chinese internet names, including Alibaba, may be selling off in response to Amazon's tepid outlook and slowdown in cloud computing. Alibaba is the Chinese leader in cloud, so economic headwinds in the country also threaten this business segment, which investors are hoping could be the company's second act after its e-commerce platform.  

China's property sector is also in the doldrums, so renewed lockdowns and economic anxiety likely aren't doing any favors for KE Holdings, which offers online and offline services for housing transactions and home improvements.

RLX Technology could benefit from vaping enthusiasts being quarantined at home, but again, economic and regulatory headwinds are playing a role. The stock has been battered as China's State Tobacco Monopoly Administration has implemented stricter regulations on the manufacture of e-cigarette products this year. Likely, the indication of more harsh top-down controls is hurting the stock.

Now what

Chinese stocks are screamingly cheap these days, but that's really only on a backward-looking basis. It's very hard to forecast future growth and profits, given the unpredictable nature of the Xi administration, as well as its tenuous relationship with the U.S. Both economic and geopolitical risks are high, so Chinese stocks remain appropriate only for highly risk-on investors, or those who may have a more optimistic view of the current regime and U.S.-China relations than most.