Chinese EV stocks tumble amid elevated geopolitical concerns

Chinese EV leaders XPeng, NIO Inc. and Li Auto all fell sharply Wednesday amid increased worries about Russo-Chinese ties, escalating Taiwan tensions, lingering lockdown effects and concerns over a looming rate hike from the Fed.

Shares of each of the automakers marked notable declines on the day as broader indices in China pulled back sharply. For example, Hong Kong’s index slipped about 1.8% on Wednesday, giving back gains on Tuesday and more. The declines were led by Chinese property developers, which HSBC warned were responding to concerns over central bank tightening.

In the auto sector, among US-listed stocks, XPeng led declines amid its investor day, sliding 11.02% to $14.14 as of 12:11 p.m. ET, hitting a 52-week low. Meanwhile, Li Auto slipped 8.3% and NIO Inc. slid 8.34%.

All Eyes on XPeng

Morgan Stanley analyst Tim Hsiao indicated that Wednesday’s sell-off might be tied to pricing of the XPeng’s new G9 SUV, which XPEV announced at its investor day. The new model’s price came in above his estimate of 300K RMB ($42.5K), instead ranging from 309,900-469,900 RMB (about $44K to $67K).

In a note to clients ahead of the Guangzhou-based automaker’s investor day, Morgan Stanley analyst Tim Hsiao warned that market feedback on the auto prices during the event “will likely dominate the stock’s movement” in the near term.

Hsiao added that “any potential disruption of XPeng’s production resulting from the recent lockdown in Guangzhou” will also play a part in the stock’s near-term trajectory.

Lingering Lockdown Concerns

Meanwhile, while lockdown measures in major Chinese cities like Chengdu were recently lifted, the impact of the measures remain a concern for the region’s economic prognosticators. For example, the Asian Development Bank cut its 2022 growth forecast for developing Asia largely in response to the disruptions the pandemic restrictions have wrought on supply chains and consumers across the region.

“Several downside risks loom large,” a report released on Wednesday said. “A sharp deceleration in global growth, stronger-than-expected monetary policy tightening in advanced economies, the Russian invasion of Ukraine escalating, a deeper-than-expected deceleration in the People’s Republic of China, and negative pandemic developments could all dent developing Asia’s growth.​”

Author: Kevin P. Curran, Seeking Alpha

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