The Good Ship Lollypop is so over. A series of alleged frauds at little-known Chinese companies listed in the U.S. has triggered a stunning shift in sentiment among investors, who are now dumping even the darlings of the Chinese Internet as they focus on hidden business risks, according to a report in the Wall St Journal.
For years investors, swept up in the broader China growth story, gave U.S.-listed Chinese companies the benefit of the doubt on governance and regulatory issues.
That was particularly true of the Internet sector. Investors were prepared to overlook unreliable Internet traffic data, pervasive censorship, and a reliance on an inherently risky corporate structure in their enthusiasm to profit from the explosive spread of social media, online shopping and search.
That's now changing as risk-averse investors reassess investing in China, where growth is slowing.
The latest news to send investors running was a report by Reuters on Thursday that quoted U.S. Securities and Exchange Commission Director of Enforcement Robert Khuzami as saying the Department of Justice is investigating accounting irregularities at Chinese firms. The story didn't name any of the companies being investigated, and didn't suggest that Internet firms specifically would be affected. But shares of Chinese Internet majors plunged….
Find out more at http://online.wsj.com/article/SB10001424052970204138204576602330944302732.html?mod=WSJ_business_whatsNews
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