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Shares of electric vehicle (EV) company Nio are up more than 3% in early trading today as investors appear to be more optimistic about the Chinese economy. A bullish note issued by Morgan Stanley is also fueling the rally in NIO stock. In fact, many Chinese stocks are up overall as the number of Covid-19 cases in the country declines.
This week, the city of Shanghai announced it would “resume road and public transportation” within its boundaries, starting on Wednesday. Nio has a production facility a few hours west of the city.
On top of cooling restrictions in Shanghai, the Chinese government also disclosed today that it would lower the sales tax on “some low-emission passenger vehicles by half.” That change should meaningfully boost the financial results of Nio and its EV peers.
Finally, China’s official manufacturing purchasing managers index rose for the month of May, reaching 49.6 versus 47.4 in April. Economists polled by Bloomberg had expected a reading of 49 on average.
Aside from Nio, other major Chinese stocks are climbing right now. Alibaba (NYSE:BABA) is up nearly 4% for the day. Meanwhile, JD.com (NASDAQ:JD) is jumping almost 6% so far.
Looking forward, Morgan Stanley expects NIO stock to advance in the near term. The firm sees Nio benefiting from the reopening of Shanghai and “local stimulus programs” in the coming months. Overall, analyst Tim Hsiao believes the electric vehicle company is poised to “resume sales momentum.”
Morgan Stanley has a $34 price target and an “overweight” rating for NIO stock.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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