Nio Shares Rally Amid Chinese State Banks' Support for the Yuan

Nio (NIO) shares saw a significant increase in value in Tuesday's morning trading, surging by 8.2% at 11:30 a.m. ET. This uptick in Nio's stock is generally attributed to recent actions taken by China's major state-owned banks geared toward bolstering the Chinese currency, the yuan.

Selling dollars, buying yuan

China's economic recovery has been uneven as it navigates the aftermath of the COVID-19 pandemic. The authorities have supported the property sector, but their tentative approach regarding broader economic stimulus has left investors wanting more. The combination of these factors has previously resulted in underwhelming performances for Chinese stocks, including Nio. However, recent developments suggest a shift with potential positive impacts for Nio.

A Reuters report has revealed that China's top state-owned banks are buying large quantities of yuan and selling U.S. dollars. This maneuver aims to counteract speculative short-selling of the yuan, effectively strengthening it and concurrently providing a boost to the stock prices of companies based in China, like Nio.

Is Nio stock a buy right now?

Even after the rally, Nio's stock is still down about 42.5% over the previous year and has dropped a steep 90% from its peak in early 2021. The company's market value has suffered from China's challenging economic conditions, making it a high-risk investment prospect.

Considering its expected sales, Nio may appear as an attractively priced investment, especially with the company showing growth in revenues and vehicle deliveries. Nonetheless, Nio continues to operate at a loss and its journey toward profitability is filled with uncertainty.

Investors willing to embrace risks may find Nio's reduced stock prices appealing, especially in the context of a potential EV market rebound. However, for those less comfortable with the volatility and specific risks related to Chinese market investments, Nio may not be a suitable addition to their portfolio.

Nio, China, Stocks