China’s small and medium-sized companies are showing signs of entering a bull market, despite a broader downturn in local equities. 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. One of them is 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. Another factor is investors’ light positioning in these companies and regulators’ consideration to include eligible securities into the CSI cross-market index system.

The Beijing exchange was launched two years ago with the intention of helping small firms raise funds and make the nation’s financial markets more multifaceted. The largest of around a dozen exchange-traded funds tracking the index have assets of about 228.8 million yuan ($31.9 million), indicating moderate investment compared to other options.

Overall, this growth suggests that investors are becoming more optimistic about China’s economic prospects and see opportunities for growth in small and medium-sized companies. While there are still uncertainties ahead, such as trade tensions with the US and concerns about debt levels, this trend could continue if regulatory support remains strong and economic conditions improve further.