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After Chinese regulators issued a set of draft rules designed to prevent unfair online competition, the Nasdaq Golden Dragon China Index, which tracks 98 of the largest Chinese companies listed in the United States, plummeted on Tuesday.

As Beijing authorities step up their crackdowns on some of the largest domestic companies, Chinese stocks listed in the United States are facing another wave of selling pressure.

After China’s State Administration for Market Regulation issued a set of draft rules aimed at preventing unfair online competition, the Nasdaq Golden Dragon China Index (tracking 98 of China’s largest companies listed in the United States) plummeted 4.5% on Tuesday.

The news came a few hours after the state-backed People’s Daily commented that China will strengthen its scrutiny of the entertainment industry and its so-called “idol culture”.

As Chinese regulators try to control the country’s technology giants, these moves are the latest in a series of announcements that shake investor confidence.

Michael O’Rourke, chief market strategist at JonesTrading, said: “This will definitely pose a challenge to the investment environment in the future.” “Investors do need to be cautious,” he added.

The chairman of the US Securities and Exchange Commission Gary Gensler issued the most direct warning to date on the risks of investing in Chinese companies.He asked the staff of the U.S. Securities and Exchange Commission to “suspend temporarily” the approval of the initial public offerings of shell companies used by Chinese companies to list in the U.S.

Tuesday’s plunge was led by technology giants such as Alibaba Group Holdings Ltd., JD.com and Baidu, all of which have fallen by at least 3%.

Since it hit a record high in February, the Nasdaq Golden Dragon China Index has plummeted by more than 50%, which has allowed the Chinese stock market to experience six months of brutal selling in the United States. Along the way, some of the most prolific investors in the world have already started to switch jobs.

After Cathie Wood’s flagship Ark Innovation ETF reached 8% of its assets in February, it has reduced its exposure to shares of companies in the world’s second largest economy to zero.

At the same time, Paul Marshall, the co-founder of the $59 billion hedge fund Marshall Wace, said in a letter to clients last week that people might think that Chinese stocks listed in the United States have become “uninvestable.”

Other major funds have also joined the ranks. The US Securities and Exchange Commission documents show that Soros Fund Management Company, D1 Capital Partners and Soroban Capital Partners all withdrew part or all of the American depositary receipts held by Chinese companies in the second quarter. .



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