What happened
Many different U.S.-listed Chinese technology stocks have been hit in recent days by fear and uncertainty related to a crackdown by the Chinese government. The battle took another turn today, but there's reason to think Chinese electric vehicle (EV) maker Nio (NIO 1.16%) might benefit. As of 3:20 p.m., Nio shares were up 4% on the day, after having jumped more than 6% earlier.
So what
The situation escalated somewhat Friday morning when the Securities and Exchange Commission highlighted additional risks with Chinese stocks, and imposed tougher disclosure requirements for these companies seeking to list on stock exchanges. So if the situation is getting even more tense, why would that be good for Nio? There are several possibilities, including the potential for the Chinese government to focus its attention on competitor Tesla's (TSLA +0.78%) operation in Shanghai.
Nio ET7 luxury electric sedan. Image source: Nio.
Now what
U.S. investors are aware that the Chinese government can be unpredictable, and can seemingly act for purely political reasons unrelated to the businesses themselves. If Chinese and U.S. regulators go tit-for-tat and things continue to escalate, Tesla could become a high-profile target through no fault of its own.
And the U.S. has just taken a step to amp up the battle. SEC Chairman Gary Gensler issued a statement saying, "I have asked staff to seek certain disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective."
Investors might also believe that the U.S. action could limit further listings of Chinese EV makers. With China being the largest automotive market in the world, investors might feel that owning Nio and the several other EV companies already listed may thus be more valuable.
Nio has been growing sales quickly, and the company announced today that it will report its second-quarter financial update on Aug. 11. Investors will be watching to see if the business continues to move closer to profitability.
