Chinese Early Stage Tech Stocks on the Brink of Bull Market

Beijing’s small and medium-sized companies are leading the charge in China’s stock market recovery, defying the broader downturn in local equities. The Beijing Stock Exchange 50 Index, which tracks early-stage innovative companies listed in the capital, rose an impressive 3.1% on Monday, bringing gains from an October low to over 19%. This index has outperformed its larger, tech-heavy counterpart by 12 percentage points and the benchmark CSI 300 Index by a remarkable 16 percentage points.

One of the factors driving this strong performance is the wider fluctuation range of up to 30% allowed for constituents on the Beijing board, compared to a maximum of 20% for 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 positive performance on the Beijing exchange.

Launched just two years ago with the goal of helping small firms raise funds and diversify China’s financial markets, the Beijing Stock Exchange has seen tremendous growth in recent months. The largest of around a dozen exchange-traded funds tracking this index have assets of approximately $31.9 million ($228.8 million), highlighting the growing interest among investors in these promising companies.