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Why is NIO stock heating up today?


Source: Michael Vi / Shutterstock.com

Shares of Nio (NYSE:NIO) end the week on a high note, with NIO stock rising more than 7% on the day. This rally comes even amid mixed price action in the overall market.

Although Nio’s rally is uncorrelated to US equities, it is correlated to Chinese stocks. We’ve seen this pattern before, so today’s action should come as no surprise to investors. That’s even as NIO stock opened roughly flat on Friday, at one point down 1% as well.

For shrewd traders, this was a long-term opportunity.

The iShares China Large Cap ETF (NYSEARC:FXI) also opened lower today before rising rapidly. Shares of the exchange-traded fund are now up 3% on the session. Other names like Ali Baba (NYSE:BABA), Pinduo-duo (NASDAQ:PDD) and Xpeng (NYSE:XPEV) are also well on the day.

This rally in Chinese stocks can be attributed to hopes that China will soon ease some of its Covid-19 related restrictions. If so, it will improve the economy and benefit businesses like Apple (NASDAQ:AAPL) and Starbucks (NASDAQ:SBUX), but also for car manufacturers like Li-Auto (NASDAQ:LI), Nio and even You’re here (NASDAQ:TSLA).

Some reports indicate that the Chinese economy will fully reopen by mid-2023. If true, it will be a huge win for China and China-based companies, and a huge win for the world. China is one of the largest economies in the world and a major supplier for many multinational organizations.

For what it’s worth, positive news about China easing its Covid-19 restrictions also helped NIO stock rise 21% on Wednesday. Over the past five days, NIO has increased by more than 25%.

Breakdown of NIO shares

Today’s rally can also be attributed to Nio’s November delivery results, which were released on Thursday morning.

Specifically, the automaker delivered 14,178 vehicles in November. That was up more than 40% from October and 9% from a previous month’s record, which was set in June. For 2022, the company has now delivered over 106,000 vehicles, up 32% year-on-year (YOY).

Along with the positive results, Nio said it plans to ramp up deliveries and production this month.

Shares of LI rose by a similar amount to NIO on Friday, and the company also announced its monthly delivery results on Thursday. Li Auto recorded deliveries of more than 15,000 vehicles last month, up nearly 50 percent from October. The company has now delivered over 112,000 vehicles this year.

As of the date of publication, Bret Kenwell held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

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