(Bloomberg) -- Chinese small-cap stocks pared much of a selloff earlier this week after the nation’s top securities regulator sought to ease concern over the potential delisting of firms with weak financial health.

The CSI 2000 Index climbed 6.7% after the China Securities Regulatory Commission said the latest delisting rules target “zombie” listed companies but not small-cap stocks as a whole. The tighter rules won’t have an impact on the broader market in the short term, the regulator said in a statement late Tuesday. 

Wednesday’s rebound, the biggest in over two months, nearly erased losses in the small-cap gauge from the prior session. The regulatory changes would lead to potential delisting of a little more than 100 firms by 2025, the watchdog added, placating investors who had earlier feared mass delistings and warning tags placed on smaller companies for failing to comply with revamped rules.

Such clarification from the CSRC “may be deemed as a step-up by some investors, with CSRC apparently prioritizing near-term market volatility over the development of good dividend practices,” Daiwa Capital Markets analysts including Leo Ho wrote in a note. 

The explanation also led to a rebound in growth-heavy indexes which had been been perceived victims of the shift, as the Star 50 gauge advanced 2.5%, while the Beijing Stock Exchange 50 Index rose 4.3%. Meanwhile, the Shanghai Composite Index gained 2.1%, making it the best day since securities chief Wu Qing took the helm in February. 

Smaller capitalization shares had slumped on the first two days of the week after the publication of regulatory documents Friday aimed at tightening stock-market supervision. Some analysts interpreted the new guidelines as encouraging a pivot toward larger companies, which tend to be seen as having better corporate earnings and practices compared with microcap stocks.

(Updates prices throughout.)

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