what happened
Sections of iQiyi (NASDAQ: IQ) fell today when investors reacted to news that the U.S. Securities and Exchange Commission (SEC) could hold Chinese stocks that do not comply with U.S. accounting standards. Investors are also concerned about the increasing regulation of Chinese technical companies by the Chinese government.
The tech stock went down 13.3% at the end of the trading day.
so what
The SEC issued a statement earlier this week on the Holding of Accountable Foreign Companies (HFCA) Act, which was enacted under the Trump administration. The HFCA act states that any foreign companies that do not comply with U.S. inspection standards for three years could be listed from U.S. stock exchanges.
Image source: Getty Images.
The HFCA Act specifically targets China, and there are also rules that require companies to report whether they have board members in the Communist Party.
Investors are worried that some Chinese-based technology companies could be started from U.S. exchanges, and are now selling their shares.
In addition, investors are concerned about the proliferation of Chinese-based technical companies from the Chinese government.
The Chinese government said earlier in the week that it may set up a joint venture between itself and Chinese tech companies to monitor the data used by millions of users.
Now what
IQiyi investors should expect some additional share price movements from the company’s stock, as well as other Chinese stocks. With the SEC following the use of the HFCA Act and the Chinese government becoming more involved in Chinese tech companies, it is likely that some investors will leave Chinese tech stocks to ease these tensions.
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