The gains in Nio (NYSE:NIO) have all but evaporated on Thursday, as shares were up 4.7% at one point on the day. NIO stock was enjoying a surprising rally despite notable losses in Tesla (NASDAQ:TSLA), which then dragged down other electric vehicle (EV) stocks.
The gains in Nio came even amid mixed action in the overall indices. However, as the selling pace quickens on Wall Street, the gains in Nio have disappeared. On the plus side, shares are still flat on the day.
Upon closer inspection, there are more undercurrents at play, though.
For instance, Li Auto (NASDAQ:LI) is still up 2.7% (and was up 5.7%), while Xpeng (NYSE:XPEV) is up 5,7% (and was up 7.3%.)
There’s strength in Chinese EV stocks while domestic EV stocks like Rivian (NASDAQ:RIVN) and Lucid Group (NASDAQ:LCID) are lower in the session. Obviously Tesla’s 7.5% post-earnings dip is weighing on the domestic automakers, but it’s interesting that Chinese auto stocks are higher on the day — NIO stock included.
Chinese Equities Driving NIO Stock Higher
Seeing Chinese EV stocks rallying while US EV stocks fall raises an eyebrow. However, when we look at the iShares China Large-Cap ETF (NYSEARCA:FXI), it was performing well earlier in the day.
The ETF was up 2.5% at one point on the day, but is now close to flat in the session. Perhaps that is why NIO stock was rallying earlier in the session. It’s also worth pointing out that Nio, Li Auto and Xpeng fell more than 10% in yesterday’s session. That’s as the FXI ETF fell almost 5% on Wednesday.
The simpler takeaway from all of this is that NIO stock and other Chinese EV stocks are trading in sympathy with Chinese equities overall.
Today’s surprise comes from Tesla, which missed on revenue expectations and beat on earnings estimates. While the company obviously faced some issues in the quarter, it did deliver solid results. But more concerning is CEO Elon Musk’s comment that “China is experiencing quite a burst of a recession of sorts.”
He talked about other economies, but I would have thought his comment regarding China specifically would be having a larger impact on NIO stock and other Chinese EV players.
On the date of publication, Bret Kenwell did not have (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.
