Smaller company stocks in China are currently performing better than large caps, after delivering more solid earnings growth, the latest data from Bloomberg reveals.
The small-cap ChiNext Index rose close to its highest level in two years, based on year to date numbers – 5.9 percent so far in 2018 – compared with a 4 percent fall among larger companies listed on the CSI 300 Index.
Small-cap companies involved in innovation and technology – key sectors for the Chinese government – performed particularly well, as ChiNext has been tasked with targeting innovative and fast-growing firms, especially hi-tech companies.
This is something of a turnaround, with smaller companies back in favor with investors after enduring a two-year decline.
China’s small caps had fallen out of favor with investors since the bursting of the 2015 equity bubble that valued the ChiNext at more than 130 times earnings at its peak.
According to Shanghai-based Haitong Securities figures, ChiNext-traded companies posted a 29 percent profit increase in the first quarter this year, recovering from a 16 percent decline for the whole of 2017.
