High-flying shares in Chinese companies have come crashing to the ground recently, amid a flurry of accounting scandals and a crackdown by US regulators.
Less than two months ago, US investors were eagerly buying shares in Renren, a social-networking company dubbed the 'Facebook of China,' and other firms that seemed poised to benefit from China's rapid economic growth.
Renren's shares jumped 29 per cent on the day of its initial public offering on the New York Stock Exchange in May. Then they sank, closing at just $7.03 on Friday, down to about half of their IPO price of $14.
Of the 12 Chinese companies that have debuted on US exchanges this year, only two are trading above their IPO prices, according to data from Morningstar, an investment research company.
'The drumbeat out of China right now is that certainly there's an air of fraud and of different sets of numbers for Chinese reporting versus US reporting,' said Bill Buhr, an analyst with Morningstar.
'It basically is spooking investors. I think they assume that where there's smoke, there's fire,' he added.
The fallout threatens even firms which have not been tainted by accusations of wrongdoing, such as search engine Baidu, which closed at $117.68 on Friday, a drop of nearly 25 per cent from its intraday high of $156 in April.
Source : New Age
