Why Baidu shares fell today

What happened

Stocks Baidu Inc. 09.30 NASDAQ: BIDU it fell today as investors feared the Chinese technology giant could gain heightened oversight by Chinese regulators, amid threats from the U.S. over potential deletions of foreign stocks.

Inventories of technology fell by 13.4% today.

So what

Investors have been upset on several occasions over the stock of Chinese technology for several reasons. First, the U.S. Securities and Exchange Commission (SEC) has threatened to evict foreign companies from U.S. stock exchanges if they do not adhere to U.S. audit practices.

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Under the Holding of Responsible Foreign Companies Act (HFCA), established by the Trump administration, foreign companies could potentially be removed from U.S. stock exchanges if they do not adhere to U.S. auditing standards for three years in a row.

Growing tensions between the U.S. and China have led to some investors on the brink, and any talk of potentially removing stocks from the list is enough to make investors uncomfortable.

The deteriorating situation for Baidu shares is the fact that the Chinese government is starting to expand its control over large technology companies. The government said earlier this week that it could establish a joint venture between Chinese technology companies and the government to monitor data users.

What now

Investors can expect higher volatility from Baidu and other Chinese stocks in the near future. As the Chinese government expands its oversight of local technology companies – and as US regulators become increasingly skeptical of Chinese audit practices – investors will certainly abandon at least some of their positions in China-based technology stocks.

This article presents the opinion of a writer who may not agree with the “official” position of the Motley Fool premium advisory service recommendation. We are colorful! Examining the thesis of investing – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier and richer.

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