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But areas of the market dominated by small stocks and frequented by the country's retail investors have done surprisingly well. Scores of retail investors are dabbling in micro-cap stocks - stocks whose market capitalisation is tiny - operating under the radar of big funds and investors and their massive market-moving flows. Strategies such as Cui's stand out this year in a stock market depressed by China's wobbly economy, heightened geopolitical risks and surging overseas interest rates. Some brokerages are starting to recommend micro stocks to clients. GF Securities said in an October strategy report that buying micro stocks is part of a new investment paradigm in a stock market suffering from anaemic growth, and global decoupling risks.

Persons: Aly, horribilis, Joseph Cui, Cui, Yuan Yuwei, Helen Wu, Wu, Yi Huiman, Lu Deyong, Seres, Lu, Huang Yan, Jason Xue, Samuel Shen, Summer Zhen, Vidya Ranganathan, Simon Cameron, Moore Organizations: REUTERS, Rights, Huawei Technologies, Regulators, Wisdom Asset, China Securities Regulatory Commission, Huawei, Security Technology, TRS Information Technology, Automotive, Seres, Securities, Shanghai QiuYang, Thomson Locations: Shanghai, China, Rights SHANGHAI, HONG KONG, United States, ChatGPT, Ningbo, Summer, Hong Kong

Shares of state-owned enterprises (SOEs) have risen sharply since November, when top securities regulator Yi Huiman called for a new model to price them. Mainland-listed state telecom operators China Mobile and China Telecom have jumped more than 50% each this year and China Petroleum & Chemical Corp (600028.SS) has soared 44%, compared with a 5% gain in the benchmark index (.CSI300). More than 10 mutual fund companies have applied to launch nearly a score of SOE-dedicated funds since March, state media reported. E Fund Management Co this week launched a mutual fund, aiming to raise up to 8 billion yuan ($1.16 billion) to be ploughed into shares of strategically important SOEs. State companies' shares have so far outperformed the broader market, delivering what investors term a rare "SOE alpha".

Many investors say that stocks of drugmakers and medical equipment companies, however, will likely get a more lasting lift from China's bumpy journey towards an eventual economic opening. Investors have snapped up Chinese tourism (.CSI930633), leisure (.CSI930654), retailing (.CSI930674) and food and beverage stocks (.CSI930653) over the past week. "After curbs are relaxed, China could experience the impact from surging virus cases, along with rising deaths, potentially hitting the economy," the brokerage said. "I think it's reasonable to think that as infections rise, they're going to have shortages in some areas of workers," he said. Grow Investment Group chief economist Hong Hao, warning of confusion and chaotic expectations ahead, recommended internet platform companies and food delivery firms in the short term.

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