Shares of Chinese companies listed in New York fell on Wednesday after American regulatory authorities alleged that the big four auditors had refused to co-operate in probing fraud by Chinese firms.
Most of the losers were Internet stocks.
New Oriental Education & Technology Group Inc. tumbled the most since July as Wells Fargo & Co. said the education services provider is at risk of being delisted after the Securities & Exchange Commission accused the auditors of refusing to cooperate in a fraud probe of companies based in China, a report by Bloomberg said.
Chinese search engine Baidu and Sina Corp also fell to two-year lows while Youku Tudou fell the most since September.
The U.S. Securities and Exchange Commission said on December 3, that Deloitte Touche Tohmatsu CPA, Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs refused to cooperate with accounting investigations into nine companies traded in the U.S.
Incidentally the regulator has not named the stocks on which the probe is centred.
Analyst Trace Jordan mentioned in a report that Well Fargo had said that the probe would place New Oriental and Ambow Education Holding at a risk of being delisted from the American exchanges.
The auditors themselves have said in their defence that Chinese laws prevent them from complying with demand made by the SEC. Chinese law bans the removal offshore of audit papers, while foreign regulators aren’t allowed to work inside the nation’s borders.
This has created a situation where investors do not have much faith in the stocks of Chinese firms, which traded in the U.S.
Shares of Chinese companies were under heavy selling pressure including Baidu.com, Inc. (ADR)(NASDAQ:BIDU) slumped 8%, SINA Corp(NASDAQ:SINA) slumped 7.50%, Suntech Power Holdings Co., Ltd. (ADR)(NYSE:STP) fell 3.50%, Ctrip.com International, Ltd. (ADR)(NASDAQ:CTRP) lost 8.50% and SouFun Holdings Limited (ADR)(NYSE:SFUN) slid 5%.