Chinese stocks listed in the United States took a beating on Wednesday as brokers raised red flags about trading risks following a series of accounting scandals that have afflicted the sector. Interactive Brokers Group Inc sounded the loudest alarm on the companies, saying it is prohibiting clients from borrowing money to take leveraged positions on 160 Chinese securities due to "elevated risk concerns".
It began enforcing the ban on Monday and will phase it in over the course of this week. Discount brokerage TD Ameritrade also said on Wednesday it is closely monitoring US-listed shares of Chinese companies. Many of the biggest losers on US exchanges on Wednesday were Chinese companies included on Interactive's list. The New York-traded shares of Chinese real estate service provider Syswin Inc tumbled 23.1 percent to $4 and online video company Ku6 Media Co Ltd lost 9.7 percent to $3.18. Orsus Xelent Technologies Inc, a designer and distributor of cellular phones, dropped 13.5 percent to $1.99.
However, well-known bigger companies not on the list, such as Renren Inc, were also hit. Renren lost 13.6 percent to close at $10.51. In a further sign of the accounting doubts surrounding some of the new Chinese listings, Taomee Holdings Limited said in a regulatory filing for its IPO that its auditors found major gaps in its internal controls.
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