(Reuters) - U.S.- listed shares of Chinese companies fell on Tuesday over rising tensions between Beijing and Taiwan, while a Reuters report naming Alibaba (NYSE:BABA) among the first batch of firms to be audited by the United States also dented sentiment.
Taiwan's military fired warning shots at a Chinese drone which buzzed an islet controlled by Taiwan near the Chinese coast, raising tensions in the region.
"Investors are worried about the regional conflict to escalate," said Bo Pei, analyst at US Tiger Securities.
Meanwhile, U.S. regulators have identified e-commerce giant Alibaba Group Holding Ltd and other U.S.-listed Chinese companies for audit inspections starting next month, three sources familiar with the matter told Reuters.
The move from the regulators follows Friday's audit deal between Beijing and Washington allowing U.S. agencies to vet accounting firms in mainland China and Hong Kong.
"Jitters ahead of inspection is the only thing I see now (affecting stocks)," said Thomas Hayes, chairman at Great Hill Capital.
Shares of Alibaba Group Holding Ltd fell nearly 3%, while search engine company Baidu Inc (NASDAQ:BIDU) reversed course from premarket gains to trade down 7%. JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) tumbled about 2%, while online entertainment firm iQIYI dropped 8.9%.