Here is why US-listed equities are experiencing a blood bath

on Mar 19, 2022
Updated: Mar 21, 2022
  • US-listed Chinese stocks experiencing a blood bath continuing losses from last week
  • Investor concerns as Russia ask for Chinese military aid in Ukraine invasion
  • Nasdaq Golden Dragon China Index dropped 10%

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US-listed Chinese stock continued to experience heavy selloffs on Monday at the back of an 18% drop last week, as growing concerns regarding China’s close association with Russia compounded losses driven by Beijing’s crackdown on technology titans and the looming prospect of delisting of US-listed equities.

Chinese firms face the risk of delisting in the US

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The Securities and Exchange Commission has already identified several companies as part of a regulatory crackdown on foreign corporations that decline to disclose their accounts to US regulators, putting Chinese enterprises at risk of delisting.

Alibaba Group Holding Ltd (NYSE: BABA) American depositary receipts and Inc.’s (NYSE: JD) shares dropped 5% in the premarket, with Pinduoduo Inc. tumbling 9% and Baidu shedding 7%. Alibaba had lost 27% of its value since the beginning of the year by Friday’s close, which is the lowest the shares have lost since August 2016.

The drop today came after news that Russia has requested military aid from China for its assault in Ukraine. As a result, traders are concerned that Beijing’s possible outreach to Russian President Vladimir Putin could result in a global reaction against Chinese companies and possibly penalties. The sentiment was equally hurt because of the COVID-19 induced lockdown in the northern region of Jilin and Shenzhen, the major tech hub in the south.

Nasdaq Golden Dragon China Index dropped 10%, the highest in seven years

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On Friday, the Nasdaq Golden Dragon China Index, which monitors American depository receipts issued by Chinese companies, tumbled 10% to its lowest point since September 2015. Interestingly the index fell for the fourth week in a row, the longest losing streak since October, as renewed regulatory concerns loomed.

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Investors in tech stocks that are priced based on prospective growth forecasts are also keeping a close eye on the Federal Reserve’s rate-hiking cycle, which is set to begin this week with a 25 basis-point increase.

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