Despite a broader decline in local stocks, shares of Chinese small and medium-sized companies are experiencing a surge and are poised to enter a bull market. The Beijing Stock Exchange 50 index, which tracks innovative early-stage companies listed in the capital, rose an impressive 3.1 percent on Monday, with gains of more than 19 percent from an October low. This index outperformed its larger, tech-heavy peer by 12 percentage points and the benchmark CSI 300 index by 16 percentage points, making it the standout performer in China this quarter.
The strong rebound of the Beijing board can be attributed to several factors. Firstly, the wider range of fluctuation allowed for its constituents compared with other gauges, as much as 30% for its constituents in either direction compared with a range of as much as 20% for the Shanghai and Shenzhen gauges. Secondly, investors have shown light positioning in these companies and regulators have taken into consideration including eligible securities in the CSI multi-market index system. These factors have served as catalysts for growth in this area of the market.
The largest exchange-traded fund that tracks this index has assets of approximately $31.9 million (228.8 million yuan), indicating that investors are taking interest in these companies. The Beijing Stock Exchange was launched just two years ago with the aim of helping small firms raise funds and make China’s financial markets more diversified. With its impressive performance, it is clear that this goal is being achieved successfully.