Shares of Chinese electric vehicle (EV) stocks are blasting higher today. Currently, Nio (NYSE:NIO) is up by more than 20%. Meanwhile, both Chinese EV stocks Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV) are trading higher by more than 25%.
After a tumultuous past few months of delisting and regulatory fears, these three names are finally getting a boost in price. Furthermore, the Hang Seng Index closed higher by 9% today, marking the index’s best day of gains since October 2008.
What can explain the price action behind NIO, LI and XPEV stocks? Here’s what investors should know about Chinese EV stocks right now.
Why Are NIO, Li and XPEV Stocks Up Today?
Currently, Chinese EV stocks are racing higher after The People’s Bank of China (PBOC) — China’s central bank — pledged to ease regulatory crackdowns and “ensure stability in capital markets.” The PBOC also stated it would support stock listings overseas. To do this, the bank plans on drafting a cooperation plan with U.S. regulators concerning U.S.-listed Chinese stocks.
This news comes as a huge relief to many investors. The market capitalizations of names like NIO stock and XPEV have been hammered since 2022 first kicked off. Before today, both Nio and Xpeng were down more than 50% year-to-date (YTD).
Besides a cooperation plan with U.S. regulators, PBOC did not specifically state how they would enact support for overseas listings. However, the announcement has still been positively received because it shows that China is cognizant of investor concerns. Peter Garnry of Saxo Bank believes the announcement is China backing down on its harsh regulations. Garnry explained:
“This confirms that the Chinese government sees healthy and strong equity markets as key for the country going forward. The equity market is totally sentiment driven right now and everyone is looking for an excuse to buy, though the headwinds for Chinese equities are still enormous.”
What’s Next for Chinese EV Stocks?
Moving forward, the threat of Chinese regulatory enforcement seems to have lessened. Of course, it still remains unclear whether the U.S. will back down from the Holding Foreign Companies Accountable Act (HFCAA). However, Chinese EV stocks should remain listed on U.S. exchanges as long as China is willing to let U.S. auditors audit their financial statements.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
