Business & Investment

Why are Chinese stocks plummeting in the US?

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Investors in US-listed Chinese equities have reasons to worry. Over the past few days, the stock prices of these stocks have plummeted at an alarming rate. So why are Chinese stocks declining, and what can investors learn from China to protect themselves in the future? Here’s everything you need to know.

What about Chinese stocks?

During the three trading days, the Nasdaq Golden Dragon China Index, which tracks the performance of 98 of the largest US-listed Chinese stocks, fell almost 19%. This is the biggest drop in history.

according to BloombergIndex stocks have been devalued at £ 829 billion (£ 595 billion) after hitting a record high in February.

Why are Chinese stocks plummeting?

The fall in Chinese stocks follows a series of crackdowns on the technology and education industries by the Chinese government. NS BBC China recently reported a major overhaul of the $ 120 billion (£ 87 billion) tutoring sector.

Under the new rules, all institutions that offer tuition fees in the school curriculum must be registered as a non-profit organization. As a result, financial institutions will not be able to accept foreign investment or make it public for financing.

This news seems to have surprised investors. As a result, shares in Chinese private education companies listed in the United States, Hong Kong and mainland China plummeted.

Companies such as the TAL Education Group and the New Oriental Education & Technology Group, both listed in the United States, have wiped out a significant portion of their stock market value in just a few days.

Chinese authorities are also curbing a wide range of online services. For example, earlier this week, the government issued new guidelines aimed at improving the treatment of food delivery drivers.

The National Market Regulatory Authority (SMAR) has demanded that delivery workers pay at least the minimum wage, reduce their workload and receive better training. As a result, Meituan’s share of running one of China’s largest food delivery apps fell by 14%.

Meanwhile, shares in another Chinese tech giant, Tencent, plummeted 9% after the government ordered the company to waive its exclusive music license.

Not surprisingly, investors are increasingly concerned that these regulations in the technology and education sectors will extend to other industries. This gives many people a relatively negative outlook for Chinese equities in the short term.

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What are the lessons for investors?

The biggest lesson for investors from the current situation is Diversification.. Diversification means making different investments in your portfolio.

You can make diversified investments by investing in different companies, industries, countries, and different asset classes such as equities, ETFs, and trusts. With this strategy, you can reduce the overall risk of poor portfolio performance or loss of money.

Geographically dispersed means that political or regulatory issues in one country have less impact on the entire portfolio.

That said, diversification does not protect you if your investment choices are inadequate. Therefore, always do a research before investing.

If you are completely unfamiliar with investing, you are our Investment Guide for Beginners..Also, if you’re already familiar, use to see if you can get more out of your investment Stocks and stocks ISA, This protects your investment growth and income from taxes.

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Why are Chinese stocks plummeting in the US?

https://www.fool.co.uk/mywallethero/why-are-china-stocks-plunging-in-the-us/ Why are Chinese stocks plummeting in the US?

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