Despite a broader slump in local equities, shares of China’s small and medium-sized companies are showing signs of resilience and are poised to enter a bull market. The Beijing Stock Exchange 50 Index, which measures early-stage innovative companies listed in the capital, rose 3.1% on Monday, with gains from an October low of 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.
The strong rebound on the Beijing board this month can be attributed to several factors. Firstly, a 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. Additionally, investors’ light positioning in these companies and regulators’ consideration to include eligible securities into the CSI cross-market index system have also served as catalysts for growth in this area of the market.
Investor interest in these companies is evident through the performance of exchange-traded funds (ETFs) tracking the index. The largest ETF with assets of around $31.9 million indicates that investors are showing interest in these companies. The Beijing exchange was launched two years ago with the aim of helping small firms raise funds and making China’s financial markets more multifaceted.
Overall, China’s small and medium-sized companies are proving resilient amidst a broader slump in local equities, and their performance is being hailed as a bright spot in China this quarter.