Shares of China’s small and medium-sized companies are defying a broader slump in local equities and are poised to enter a bull market. The Beijing Stock Exchange 50 Index, which is a gauge of early-stage innovative companies listed in the capital, rose 3.1% on Monday. This took its gains from an October low to over 19%. The measure has outperformed its larger, tech-heavy peer and the benchmark CSI 300 Index by 12 and 16 percentage points, respectively, making it a bright spot in China this quarter.
The strong rebound on the Beijing board this month is partly due to a wider fluctuation range of 30% allowed for its constituents in either direction. This compares to a span of as much as 20% for the Shanghai and Shenzhen gauges. Additionally, investors’ light positioning in these companies and regulators’ consideration to include eligible securities into the CSI cross-market index system are also serving as catalysts.
The Beijing exchange, launched two years ago, was aimed at helping small firms raise funds and making the nation’s financial markets more multifaceted. The largest of around a dozen exchange traded funds tracking the index has assets of about 228.8 million yuan ($31.9 million). This has contributed to the brighter outlook for small and medium-sized companies in China.