(Reuters) – U.S.-listed shares of Chinese companies fell on Tuesday on rising tensions between Beijing and Taiwan, while a Reuters report names Ali Baba (NYSE:) among the first group of companies to be audited by the US also rattled sentiment.

The Taiwanese military fired warning shots at a Chinese drone that flew over a Taiwan-controlled islet near the Chinese coast, increasing tensions in the region.

“Investors fear the regional conflict could escalate,” said Bo Pei, an 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 from next month, three sources familiar with the matter told Reuters. .

The regulators’ move follows Friday’s auditing agreement between Beijing and Washington allowing US agencies to audit accounting firms in mainland China and Hong Kong.

“Pre-inspection jitters are the only thing I see now (affecting stocks),” said Thomas Hayes, chairman of Great Hill Capital.

Shares of Alibaba Group Holding Ltd fell nearly 3%, while search engine company Baidu Inc (NASDAQ:) reversed price on premarket earnings to trade down 7%. JD (NASDAQ:).com and Pinduo-duo (NASDAQ:) fell about 2%, while online entertainment company iQIYI fell 8.9%.