Nio’s recent trading highlights

SINCE its secondary Singapore listing on May 20, Nio has risen from US$16.90 to US$19.88 on Jul 21, generating an 18 per cent return, while ranking among Singapore’s 50 most traded stocks. Inside the 40 plus percentage swings the stock has seen in the space of just 2 months, there have been multiple technology, consumer, environmental, not to mention broader China growth factors at play. This has provided a platform for a lively share price, with the significant trader participation achieving accolades in tradability metrics.  

The first such highlight is the share of the participation. This is Nio’s second secondary listing, so to speak, with the preceding Hong Kong secondary listing open for trading for a decent portion of the Singapore trading day. Despite being the latest secondary venue, during the past 9 weeks, there have been multiple sessions when the Singapore listing has accounted for close to a third of the combined daily turnover of both secondary listings. 

The utility of the Singapore listing was also exemplified during the recent Hong Kong public holidays on Jun 3 and Jul 1. Despite the Hong Kong market closures, Singapore trading remained active with S$1.5 million and S$3.0 million transacted respectively and relatively tight spreads between the best bid and best offer price. 

Next is the amount of turnover itself. Since listing on May 20, the stock has seen close to S$270 million of total trading turnover, which averages to S$6.2 million a day, ranking among Singapore’s top 50 stocks by daily turnover for the year thus far. For the full month of June, the stock ranked as Singapore’s 35th most traded stock, which was a more than threefold increase from the stock’s initial trading sessions in May.

The consistency of the trading turnover has also supported a relatively tight spread between the best bid and best offer price throughout the past trading sessions. During the month of June, Nio averaged a 4.5 US cent spread between the highest bid and lowest offer price. Relative to the prevailing price of the stock, this represented a 21.5 basis-point spread. During the first 2 weeks of July the best bid-offer spreads over the day were also on par with those seen in the Hong Kong market at 13 basis points. 

During the overlapping trading hours between Singapore and Hong Kong, the SGX listing of Nio traded at an aggregate 0.23 per cent premium in the first 3 weeks of July. Market makers may thus have taken opportunities to deploy arbitrage strategies on the Singapore and Hong Kong listings to capture the narrow premium of the Singapore listing of Nio over the Hong Kong listing. 

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Where the arbitrage gap has been wider, with greater premiums and discounts, albeit different trading hours, has been with the Nio listings in Singapore and the US. These 2 listings are fully fungible, meaning investors can convert Nio shares to Nio American Depositary Shares listed in New York and vice-versa. The conversion process typically takes place within 2 business days under normal circumstances and investors do need to contact their brokers on the procedures and cost of conversion between SGX-listed shares and American Depositary Shares. Potential arbitrage strategies over these 2 exchanges could include buying on the close of the US trading and selling at the Singapore open if the latter is anticipated to open at a premium to the overnight US close; or buying on the Singapore close and selling at the US open, if the US is anticipated to open at a premium to the Singapore close. The average daily premium of the Singapore versus US listing was 2.1 per cent in June and narrowed to 0.4 per cent in the first 3 weeks of July.

Despite recent allegations from research firms about exaggerated revenue and profitability reporting which affected market value towards the end of June, Nio’s market price proved to be resilient and managed to stay at premium compared to the initial listing price back in May. Nio is known as a pioneer and market leader in the premium smart electric vehicle market, with current share price drivers including the outlooks for EV production and new product launches, product demand and order book momentum, raw material prices and supply chain constraints. And so, with the broader and highly fluid outlook for global growth and cost-push inflation developments, it is only natural that stocks such as Nio follow the sun with both Asia and US trading hours.