Chinese tech shares tumbled, tracking overnight weakness in their US peers, as renewed regulatory concerns unnerved investors still reeling from wild price swings this week.

Hong Kong’s Hang Seng Tech Index plunged as much as 7.1% in early trading, the most since July. JD.com and Trip.com were among the worst performers. Meanwhile, the benchmark Hang Seng Index slumped 3.3%.

Friday’s selloff comes as the US Securities and Exchange Commission identified five Chinese firms this week that could be subject to delisting if they failed to comply with certain auditing requirements. The Nasdaq Golden Dragon China Index sank 10% overnight, its biggest slide since October 2008, even as the Chinese securities regulator said it will cooperate with the US.

While analysts say the risks of delisting is unlikely to materialise in the near term, the news unnerved investors already on edge following Beijing’s yearlong crackdown and the fallout from the war in Ukraine. Since its February 2021 peak, the China tech gauge has slumped more than 60%.

The SEC update is “a reminder for the regulatory risks surrounding Chinese equities once again and the lack of positive catalysts overnight may potentially aggravate the downside move,” said Jun Rong Yeap, a market strategist at IG Asia.

Equity benchmarks in Hong Kong and onshore were hit with a fresh bout of volatility this week, with prices swinging sharply intraday. Beijing’s crackdown on private enterprise has appeared to grow in recent weeks after authorities asked food delivery platforms to cut fees charged to restaurants and warned of risks in investing in products linked to the metaverse.

Outlook

The outlook for Hong Kong stocks took a turn for the worse earlier this week after Norway’s sovereign wealth fund announced it was excluding Li Ning due to the risk that the sportswear maker contributes to serious human rights violations in China’s Xinjiang, fuelling worries about a potential retreat of other long-term investors.

“I think now people are quite concerned about the foreign funds exiting from China because we have already seen one case in Li Ning,” Alex Wong, director of asset management at Ample Capital, said on Friday. “So that is something which is quite new to the market. And of course regulatory risks remain.”