Chinese regulation leaves Wall Street wondering if Chinese stocks are still worth to invest

The Chinese government has launched a series of regulatory targeting private education and technology companies. “The latest clean-up is stronger than we expected,” said Haiyan Li-Labbé, a fund manager at Carmignac. "Investors want to know who's next." The Chinese market slump has forced Wall Street to reassess the investment outlook in the world's second-largest economy.

Market concerns were obvious on Tuesday, as speculation that U.S. traders were selling Chinese assets extended market losses. The Hang Seng index fell as much as 10% and the yuan tumbled to its weakest level against the dollar since April. Whether it's economic growth or the regulatory environment, fund managers see a lot more unpredictability than before, adding new risks to global markets. For Anthony Saglimbene from Ameriprise Financial Inc., China's long-term potential no longer worth the risk. Kairos Partners from Alberto Tocchio thinks he was lucky to have sold his shares a few days ago.

Among U.S. ETFs, those investing in Chinese stocks suffered the most. The $649 million IShare China Large Cap ETF tumbled 13% on Tuesday, while the Jinrui CSI China Internet Index ETF, which attracted more than $1 billion inflows over the past two weeks, fell 7% on Tuesday.

Tensions between the U.S. and China are increasingly taken seriously by traders, amid widespread speculation that the government will introduce tougher regulators. Next month, a U.S. investment ban on Chinese military or electronic surveillance-related companies will go into effect. Fund managers will have one year to close all relevant investments.