Chinese company stocks listed on U.S. exchanges are among the latest crazes in retail investing. Many investors have poured money into these stocks as a result of some commentators recommending them as “value” buys. However, investing in foreign companies presents unique risks—and this is a lesson that many investors are learning the hard way. Investment fraud attorney Jake Zamansky explains:
Why Foreign Stocks Present Unique Risks for Investors
What makes investing in foreign companies more risky than investing in domestic companies has a lot to do with access to information. News from overseas doesn’t always break in the U.S., and information about foreign government policies and foreign economic conditions is harder to come by. By the time investors learn what they need to know, it is often already too late to sell their shares and protect their portfolios.
What’s Happening in China?
The current happenings in China right now are a classic example. Chinese company stocks have tumbled due to what Bloomberg describes as, “an intensifying crackdown by Beijing on some of the nation’s industries.” The article goes on to explain that, “Steep losses in education stocks in the wake of a sweeping overhaul spilled over into other areas, with technology, health-care and property-related stocks falling.” This triggered a panic selloff, with many stocks falling by 30 percent or more overnight.
While some retail investors may view this as an opportunity, many experts say this is ill-advised. Bloomberg quotes one expert as saying, “I don’t think investors can do any bottom fishing at this point. We don’t know where the bottom is.” Another offers a similarly bleak perspective: “It’s unclear what level of restructuring the companies should undergo with a new regime and, in our view, this makes these stocks virtually un-investable.”
In short, investors simply do not have the information they need to make informed decisions about investing in Chinese company stocks—and it is not yet clear when this is going to change.
What if You Have Lost Money Investing in Risky Chinese Company Stocks?
For investors who have suffered significant losses, are there any options available? In many cases, the answer is “No.” For those who invested on their own, there is very little chance of pursuing a claim for financial recovery.
However, for those who invested through a stockbroker or investment advisor, it may be possible to recover their losses through FINRA arbitration. Brokers and advisors can be held liable for providing uninformed or unsuitable investment advice, and recommending high-risk Chinese company stocks could be enough to trigger liability.
Schedule a Free Consultation with an Investment Fraud Attorney
If you believe that you may be entitled to recover your investment losses from your broker or advisor, we encourage you to speak with one of our attorneys about your legal rights. To schedule a free consultation with an investment fraud attorney at Zamansky LLC, call 212-742-1414 or tell us about your investment losses online now.