Chinese Technology Stocks on the Brink of Bull Market

Despite a broader downturn in China’s local equities, shares of the nation’s small and medium-sized companies are showing signs of entering a bull market. The Beijing Stock Exchange 50 Index, which tracks early-stage innovative companies listed in the capital, rose 3.1% on Monday, marking a gain of over 19% since October. This outperformance is notable as it has beaten 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 can be attributed to several factors, including 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 are also seen as catalysts for this growth.

The Beijing exchange was launched two years ago with the intention of helping small firms raise funds and make China’s financial markets more multifaceted. While larger than other options, moderate investment has been evident based on the largest of around a dozen exchange-traded funds tracking the index that have assets of about 228.8 million yuan ($31.9 million).