Despite a broader slump in local equities, shares of China’s small and medium-sized companies are performing exceptionally well and are on track to enter a bull market. The Beijing Stock Exchange 50 Index, which tracks early-stage innovative companies listed in the capital, rose an impressive 3.1% on Monday, surpassing its October low by over 19%. This index has outperformed its larger, tech-heavy peer by 12 percentage points and the benchmark CSI 300 Index by 16 percentage points, making it a bright spot in China this quarter.
The strong rebound on the Beijing board this month can be attributed to several factors. Firstly, the wider fluctuation range of 30% allowed for its constituents in either direction compared to a span of as much as 20% for the Shanghai and Shenzhen gauges. This has created more opportunities for investors to make profits. Secondly, investors’ light positioning in these companies and regulators’ consideration to include eligible securities into the CSI cross-market index system have also contributed to the growth in this area of the market.
Investor interest in these companies is evident from the fact that the largest of around a dozen exchange-traded funds tracking the index have assets of about 228.8 million yuan ($31.9 million). The Beijing exchange, launched two years ago, was aimed at helping small firms raise funds and making China’s financial markets more multifaceted. With its excellent performance this quarter, it is clear that this goal is being achieved.