The Chinese stock markets are currently going through a rough patch. The economic data is disappointing and the authorities are trying to keep foreign capital in the country. However, the markets are mainly disappointed by the lack of interest rate cuts. According to Chinese understanding of the stock markets, interest rates should be lowered in order to stimulate the economy. This is not happening at the moment and as a result, Chinese stocks are losing a significant amount of trust. They are plummeting rapidly, as can be seen with the example of Nio. Investors should currently be more cautious with Chinese stocks, but not panic.

Nio: -6.1% Nio is an auto manufacturer that has suffered significant losses. On Wednesday, the stock fell by -6%, following a previous drop of -6.9% on Tuesday. In fact, the stock has now been declining for five consecutive days, showing that the markets have given up hope.

In my opinion, this may be economically justifiable for Nio, as the company is not expected to generate profits in 2023 (final figures are not yet available) or 2024. The net results are expected to be -2.4 billion euros and 1.6 billion euros, according to market expectations.

On the other hand, the company is at least in growth mode. For 2023, the markets expect a revenue of 10.3 billion euros. This would be an increase of approximately 40% compared to 2023, indicating that the company is successful in terms of sales. Profitability is also expected to increase despite the losses.

Nio: Market shifts to volatility The economic losses that are currently being registered by the market have been known to investors for months. The figures have not improved, but also not worsened (only the revenue for 2024 is expected to be slightly lower than previously estimated).

However, since the beginning of January, the stock has already lost -29%. This means that the company has reached a special sentiment that is no longer related to the performance of the company. The weakness of the Chinese economy seems to be paralyzing the stock markets.

Overall, I expect companies like Nio, BYD, or JinkoSolar to perform significantly worse than the estimates of previous months. This negative sentiment is somewhat exaggerated in comparison. Panic would be the wrong advisor in this situation.

Nio: Panic is the wrong advice – WKN: A2N4PB – ISIN: US62914V1061 Source: https://fundamental.aktienscreener.com/US62914V1061/131/nio-inc-adrs/data