China’s small and medium-sized companies are outperforming the broader slump in local equities, with the Beijing Stock Exchange 50 Index leading the way. The index, which tracks early-stage innovative companies listed in the capital, rose 3.1% on Monday, with gains of over 19% from its October low. This measure has outperformed 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 this month is due to several factors. Firstly, a 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. 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 growth in this area of the market.

Despite their smaller size compared to larger corporations, these small and medium-sized companies are attracting interest from investors due to their potential for high growth rates and innovation. The largest of around a dozen exchange-traded funds tracking the index have assets of about 228.8 million yuan ($31.9 million), indicating that investors are taking notice of these companies and their potential for future success.

The launch two years ago of the Beijing exchange was aimed at helping small firms raise funds and diversifying China’s financial markets by providing more opportunities for these companies to access capital from investors around the world. With its focus on early-stage innovative companies, it has become an important hub for startup activity in China and beyond.