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China stocks drop, EV maker Nio to halt production amid COVID outbreak

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Yahoo Finance Live’s Emily McCormick Brian Sozzi report that Chinese EV maker NIO says it will halt production as COVID-19 lockdowns continue.

Video Transcript

- All right and third on our list is a sharp sell off in China stocks here this morning. Asia-Pacific markets struggled today as Chinese stocks led losses, this comes on the heels of new data out of China showing producer price inflation in March was higher than expected. PPI in the country surged 8.3% year over year, well over the estimated 7.9% increase.

Meanwhile, shares of Chinese EV maker Neo are also being drilled after the company announced it is suspending production due to fresh COVID manufacturing lockdowns. Neo also said it's jacking up prices, a few weeks after it told investors on its earnings call.

Good morning, Emily. A lot to digest here from China. I would argue that these increased lockdowns in the country is something the market has not factored in at all.

- Absolutely Brian, and, of course, we are seeing a lot of pressure on the Chinese stocks today in general. Both again intraday premarket and really throughout 2022. The fact that China has really been grappling with continued COVID 19 outbreaks despite its COVID zero policies has been one of the key factors in that.

But I do want to bring up the Yahoo Finance Interactive board to really show what's been going on in these names. As you can see here, we're taking a look at the shaded boxes. So, for example, Alibaba down 2% in the premarket. This is all being shown on a market capitalization weighted basis but we could see a little bit more of the carnage here when we look on an equal weighted basis.

But, you mentioned Neo, one of the major Chinese electric vehicle makers that's down 9.5% in the early goings here. Xpeng also falling in sympathy as we can see also down about 46% for the year to date. Of course, dealing with those dual factors of a slowdown in China's economy, the fact that there have been these COVID outbreaks, as well as supply chain issues impacting automakers and other manufacturing companies globally. So again, 46% decrease so far in 2022.

Similar story here again if we take a look at Neo down in the premarket, also down by about 37% for the year to date. And if we broaden out and take a look at some of the major names in Chinese e-commerce jd.com, of course, being one of them, down about 19% for the year to date.

So, of course, equity markets as a whole have been under quite a bit of pressure in 2022. Chinese stocks, especially though, have been some of the laggards, Brian.

- I just want to note too, you mentioned Xpeng there, Emily, a source familiar with the matter just told me via email that production is in fact still continuing at that Xpeng manufacturing sites. So, maybe, perhaps not in the same boat as Neo, but again another stock we will continue to watch here at Yahoo Finance.