Why Alibaba, JD.com, and RTX Stocks Dropped Monday
What happened
Shares of Chinese companies that rallied Wednesday, then slipped, then rallied again on Friday, were giving back some of their gains again on Monday morning.
Shares of Chinese e-cigarette maker RLX Technology (NYSE: RLX), for example, were down 8% as of 10:25 a.m. EDT. Internet giant Alibaba (NYSE: BABA) had lost 8.5%. And its e-commerce rival JD.com (NASDAQ: JD) was leading the sector lower with a 10% loss.
Image source: Getty Images.
So what
That all sounds like pretty bad news, and perhaps most frustrating thing for investors is that there doesn't appear to be an obvious catalyst for these declines. There have been no analyst downgrades, no price target reductions, and no bad news from the companies themselves.
But consider: Even after the morning's declines, Alibaba stock remains up 32% from last week's low point. JD.com is still up 39%. And RLX Technology? Its share price is 77% higher Monday than where it sat a week ago.
Those are still some pretty impressive gains, even if the stocks are slipping.
Now what
The real question is whether these stocks can resume going up.
Last week, I warned that they probably would not. It seems to me that so long as the threat of delisting looms over Chinese companies due to their failure (or inability) to comply with U.S. accounting requirements that demand full transparency to U.S. auditors, this will depress investor demand for Chinese shares, put a cap on any future rallies, and generally push down the prices of these stocks.
But I could be wrong.
Last week, Chinese Vice Premier Liu He promised to try to make Chinese business regulations more "transparent and predictable," and Chinese securities regulators said they will work with the SEC "to cooperate over accounting oversight of U.S.-listed Chinese companies," so as to remove the delisting threat.
Granted, we haven't seen much in the way of concrete actions to back up these pronouncements yet -- but it's been less than a week. As UBS Global Wealth Management's Eva Lee told CNBC Monday morning, "we got to be patient on this," and UBS does still "believe that [reform is] coming."
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends JD.com. The Motley Fool has a disclosure policy.
