Chinese electric vehicle (EV) stocks Nio (NYSE:NIO), Xpeng (NYSE:XPEV) and Li-Auto (NASDAQ:LI) all came across a series of bad news from China today.
The sell-off in Chinese electric vehicle stocks comes amid a broader slowdown in the tech sector. This slowdown is fueled by a variety of headlines: a record fine against Tencent (OTCMKTS:TCEHY), radiation concerns in the United States, and new Covid-19 lockdown measures in China.
Shares of NIO, XPEV and LI are each down more than 5% today as bad news drags all Chinese stocks down.
What happened with Chinese electric vehicle stocks
This morning, investors are focusing on the ripple effects that a fine against Tencent has on the market. TCEHY stock is down today after Wall Street learned it faces a record fine for violating money laundering regulations.
Essentially, officials say its WeChat allowed users to transfer money for purposes such as gambling. Regulators also found that WeChat failed to comply with its customer identification measures.
Chinese stocks, and the trio of Chinese electric vehicle stocks, are also hurting from the new Covid-19 measures in China. The shutdowns in Shenzhen have begun to worry investors. The tech hub is home to companies like Tencent.
why is it important
While there was no specific news from Chinese automakers that would lower their stock prices, negative sentiment towards all Chinese stocks is hurting the trio.
Chinese tech stocks, in particular, are taking a beating as investors dump them amid growing worries about a domestic crackdown and fears the stocks could soon exit US exchanges. This negativity is having a snowball effect that is impacting a wide range of stocks from China, including major electric vehicle makers such as Nio and Xpeng.
What’s next for NIO, XPEV, LI
The decline in Chinese electric vehicle inventories that began in earnest in the second half of last year is expected to continue today. The extent of the fall and how long Chinese equities will remain depressed remains to be seen. Investors might want to delay buying Chinese electric vehicle stocks until the headline situation is clarified or it becomes clear that a bottom in the stock has been reached.
Year-to-date, shares of NIO and XPEV are down more than 50%.
As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.