(CNN Business) –– Popular Chinese tech stocks plunged after the US regulator named five Chinese companies that could be delisted from the country’s stock markets for failing to meet audit requirements.
Among the names cited by the US Securities and Exchange Commission (SEC) on Thursday are the fast food company Yum China Holdings, the technology company ACM Research, the biotechnology group BeiGene, the Zai Laboratories and the pharmaceutical company Hutchmed.
However, shares of Chinese tech giants also fell as investors worry more companies will join the SEC listing.
Alibaba fell more than 5% THIS Friday in Hong Kong. Its US-listed shares ended down 7.9% on Thursday.
JD.com plunged 11% in Hong Kong, after closing down 16% on Wall Street. Baidu was down nearly 5%, following a 6.3% drop in the United States.
Other dual-listed companies in the United States and Hong Kong also fell sharply.
The extensive losses come as Chinese companies face intense regulatory pressure both at home and in the US. So far this week, the SEC has signaled to five companies chinese for not adhering to the Foreign Companies Responsibility Law (HFCAA). That rule gives the SEC the power to kick companies off Wall Street if they don’t allow US watchdogs to inspect their financial audits for three years in a row.
While it applies to any foreign company, the focus on China it’s obvious. Beijing has frequently resisted such scrutiny in the past. And it requires foreign-listed companies to keep their audit documents in mainland China, where they cannot be scrutinized by foreign agencies.
The companies cited by the SEC on Thursday are the first among some 270 Chinese companies that could be delisted from the New York Stock Exchange or the Nasdaq for failing to comply with the law. As Citi analysts noted in a research report Friday, there are “concerns that more companies will be listed [de EE.UU.] in the coming months.”
This Friday, the China Securities Regulatory Commission (CSRC, for its acronym in English) responded to the US move. In that regard, it said it was confident of reaching an agreement with its US counterparts on securities supervision. Talks between the CSRC, China’s Ministry of Finance and the US Public Company Accounting Oversight Board achieved “positive progress,” the agency said in a statement.
The SEC move sparked a sell-off in Chinese shares in the United States on Thursday.
The Nasdaq Golden Dragon China Index, a popular index that tracks more than 90 US-listed Chinese companies, plunged 10% on Thursday. This represents its worst daily drop since October 2008.
Yum China, which owns the KFC and Taco Bell brands in China, fell 11% on Wall Street. ACM Research plummeted 22%. For their part, Zai Lab (ZLAB), Hutchmed and BeiGene (BGNE) fell 9%, 6.5% and 6%, respectively.
This Friday in Hong Kong, Yum China lost 6%, while BeiGene lost 5%.
Hang Seng, the city’s benchmark index, fell 1.6% on Friday, mainly on investor concerns about a protracted war in Ukraine after peace talks with Russia stalled. Japan’s Nikkei 225 fell 2.1% and Korea’s Kospi fell 0.7%. But China’s Shanghai Composite reversed earlier losses and finished 0.4%.
US stock futures also moved lower, with Dow futures down 50 points, or 0.2%. S&P 500 and Nasdaq futures were down 0.1% and 0.2% respectively.