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Originally posted on MarketBeat:
Chinese stocks got crushed on Thursday, partly because of a report that the U.S. government’s investigation of their accounting is gaining some muscle power.
By midday Thursday in New York, Youku.com’s U.S. shares were off 22%, Spreadtrum was down 13%, Baidu was down 12%, and SINA and Sohu.com were each down 10%. Shanda Interactive was down 7%.
Though none of these individual companies have been accused of wrongdoing, many of these and other Chinese stocks have been hammered on such concerns for several weeks now. Some of them have political risk at home to contend with, too, along with growing worries about the strength of China’s economy.
In addition, Macquarie analysts wrote Thursday that they see Youku.com revenue growth decelerating and gross margins shrinking — not great signs for a company that isn’t yet turning a profit.
Reuters reports:
A top securities regulator said U.S. criminal authorities are investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges.“There are parts of the Justice Department that are actively engaged in this area,” said Robert Khuzami, director of enforcement at the U.S. Securities and Exchange Commission.In an interview with Reuters this week, Khuzami revealed that a number of federal prosecutors around the country are looking into the issue, but declined to name them.The involvement of the Justice Department adds investigative firepower to the SEC and the FBI, which are also probing Chinese accounting fraud.
Update: Youku finished the day down 18% with Baidu and Sohu also recovering slightly to finish down 9% and 5%, respectively. Shanda Interactive fell further to end down 9%
source: http://blogs.wsj.com
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