China internet stocks tumble in the US on strict investigation

Chinese internet stocks listed in New York plunged after a senior US securities regulator said the Justice Department is probing accounting irregularities at firms operating out of the home country, Bloomberg reported. Sina dropped 9.7%, Baidu, China’s largest search engine, fell 9.2%, Youku.com, China’s biggest online-video website sank 18% after Securities and Exchange Commission Enforcement Director Robert Khuzami told Reuters on allegations of possible fraud of US-listed Chinese firms, saying “There are parts of the Justice Department that are actively engaged in this area.” No individual of the three internet firms were listed through reverse mergers, which the SEC’s investigation has focused on. The slump in Chinese Internet stocks was also caused by investors’ “fear” about their variable-interest entity listing structure, said Jeff Papp, an analyst at Oberweis Asset Management Inc.