The selloff in Chinese EV stocks comes amid a broader downturn in the technology sector. Driving that downturn is a variety of headlines: a record fine against Tencent (OTCMKTS:TCEHY), U.S. delisting concerns and new Covid-19 lockdown measures in China.
Shares of NIO, XPEV and LI stocks are each down more than 5% today on the bad news that is dragging down all Chinese securities.
What Happened With Chinese EV Stocks
This morning, investors are focusing on the ripple effects that a fine against Tencent is having on the market. TCEHY stock is down today after Wall Street learned it is facing a record fine for violating money laundering regulations.
Essentially, officials say that its WeChat allowed users to transfer money for purposes such as gambling. Regulators also found that WeChat was not compliant with measures to identify its customers.
Also hurting Chinese stocks, and the trio of Chinese EV stocks, is reports of new Covid-19 measures in China. Lockdowns in Shenzhen have started to cause worry among investors. The tech hub is home to companies like Tencent.
Why It Matters
While there has been no specific news from the Chinese automakers that would bring their share prices lower, the negative sentiment toward all Chinese securities is hurting the trio.
Chinese technology stocks, in particular, are getting pummeled as investors dump them over escalating concerns about a domestic crackdown and fears that the shares could soon leave U.S. exchanges. This negativity is having a snowball effect that is impacting a broad cross section of stocks from China, including leading electric vehicle makers such as Nio and Xpeng.
What’s Next for NIO, XPEV, LI
The decline in Chinese electric vehicle stocks that began in earnest during the second half of last year looks set to continue today. How bad the drop gets and how long Chinese stocks remain depressed remains to be seen. Investors might want to hold off on buying Chinese EV stocks until the situation regarding the securities is clarified or it becomes clear that a bottom in the shares has been reached.
Year to date, shares of both NIO and XPEV stock are down more than 50%.
On the date of publication, Joel Baglole 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.