October4, 2011 (Chinavestor) Shares of Chinese post-secondary education and e-Learning services provider, ChinaCast Education (NASDAQ:CAST) tumbled 30.1% on Monday. The stock is showing no signs of relief, price slipped another 5% on Tuesday by 1:00 P.M. Investors wonder what's behind such steep decline.
All it boils down to is fear of reverse merger Chinese companies. Investors have no appetite for financial wrongdoings after a long list of liquid companies got delisted from the NASDAQ and the NYSE.
ChinaCast Education (NASDAQ:CAST) sent a letter to its shareholders where it announced a hiring of an independent audit firm to review its cash balance. The same letter stated that an aggressive share repurchase program is to be cancelled at the same time.
Investors have to stick with names that are not part of the reverse-merger category. Else they have to be extremely selective. China XD Plastics (NASDAQ:CXDC) received a $100 million equity investment by Monrgan Stanley. While China XD Plastics (NASDAQ:CXDC) is a reverse merger China stock, a sound institutional investors base suggests the company is for real.
For a list of Chinese companies we consider safe, please read Chinese reverse mergers fail investors.