Chinese stocks fell, but investors in Nio shouldn’t worry.
Nio (NIO -1.75%) stock, which was holding up well until yesterday since its jaw-dropping rally in September, reversed course this morning and plunged 10% within minutes of the market’s opening. Shares of the Chinese electric vehicle (EV) maker were trading a little over 7% lower as of 11:30 p.m. ET Tuesday.
There’s nothing wrong with Nio. Chinese stocks were crashing all across the board today, and Nio was no exception. It is, after all, one of the leading EV manufacturers in the nation.
As an investor in Nio, though, you needn’t fear today’s drop in its stock price and may, in fact, consider any drop in Nio an opportunity to buy.
Chinese stocks rise, then fall
Last week, China’s top economic planner, the National Development and Reform Commission (NDRC), held a press conference and announced stimulus measures to boost the economy. The move caught many by surprise and investors saw it as the perfect opportunity to lap up Chinese stocks, many of which were languishing. Expectations soared ahead of the NDRC’s event today in anticipation of more details and a bigger stimulus package.
Investor enthusiasm, however, fizzled out quickly this morning after NDRC divulged no details. The Hang Seng Index plunged more than 9% on Tuesday, delivering its biggest intraday fall since 2008. Nio was among the several Chinese stocks that slumped.
Why you should buy and hold Nio stock
The NDRC may not have announced much today, but that doesn’t mean the government is backing out on its stimulus plans. It stated that it was “fully confident” of achieving its full-year growth target and plans to dole out 200 billion yuan, or nearly $28 billion, to the local governments and particularly support the property market.
There are no quick fixes, but any stimulus to consumer spending should boost the manufacturing sector, including the auto industry. Nio, meanwhile, is already working on its growth plans. Nio just reported record deliveries for its third quarter, expects its vehicle margin to improve significantly to 15% by the end of 2024, has launched its first mass-market brand, Onvo, expects the L60 SUV to be a hot seller, and plans to launch a new model under Onvo every year to target the mass EV market. The EV stock remains a buy and hold in my book.
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.