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The small and medium-sized companies of China are defying the broader slump in local equities and are on the brink of entering a bull market. On Monday, the Beijing Stock Exchange 50 Index, which is a measure of early-stage innovative companies listed in the capital, rose by 3.1%. This was an increase of over 19% from its October low. Despite this being a smaller index compared to its larger, tech-heavy peer, the benchmark CSI 300 Index, it has outperformed it by 12 percentage points this quarter.

The strong rebound on the Beijing board this month can be attributed to several factors. Firstly, there is a wider fluctuation range of 30% allowed for its constituents in either direction compared to as much as 20% for the Shanghai and Shenzhen gauges. 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 this growth.

Despite being a relatively small exchange with assets worth only around $31.9 million ($228.8 million), there is significant interest from investors in these companies. This is evident from the fact that over a dozen exchange-traded funds track this index. 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, while larger tech giants may still dominate China’s stock markets, small and medium-sized companies are proving to be an exciting area for investment growth that should not be overlooked.

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