Despite a broader slump in local equities, shares of China’s small and medium-sized companies are experiencing growth and are on the brink of entering a bull market. The Beijing Stock Exchange 50 Index, which measures early-stage innovative companies listed in the capital, rose an impressive 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, 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. 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.
Investors have taken notice of this growth potential, with around a dozen exchange-traded funds tracking the index boasting assets of about 228.8 million yuan ($31.9 million). The Beijing exchange was launched two years ago with the aim of helping small firms raise funds and make China’s financial markets more diverse.
Overall, while larger Chinese equities may be experiencing a slump, small and medium-sized companies are proving resilient and poised for growth. The Beijing Stock Exchange 50 Index is an excellent example of this trend and could serve as a bellwether for further investment opportunities in this sector.