Small-cap stocks may be the champions of the equity market rally on the Chinese mainland, but foreign investors are playing it safe with a focus on bigger, better-known issues.

"It's a difficult time for value investors, who base their investment decisions on fundamentals," said Steve Yang, A-share strategist with UBS Securities Co Ltd.

Analysts said that A shares are underweighted by most overseas funds. What these investors are stashing in their portfolios are blue chip stocks with solid fundamentals and reasonable valuations that have also underperformed the benchmark indexes.

"We play by different rules from our foreign friends," said a domestic equity fund manager in Shenzhen.

Playing by the Chinese brokers' rules, "we like small-caps because their price volatility offers more chances to make a fast buck by those who know the market and its nuances."

"In contrast, foreign investors, mostly institutions, tend to emphasize on fundamentals. They care more about such indicators as the earnings outlook, return on assets and dividends," he said.

Foreign investors want to join the bull market party, but they prefer to do so on their own terms with "safer" stocks.

"Reasonable valuation, a generous return on equity, large market capitalization and good liquidity are essential elements in making a share attractive to foreign investors," said Yang.

A case in point is Shanghai-listed Shanghai International Airport Co Ltd, which was closed to foreign investment on Tuesday after the overseas ownership level hit 28 percent, which is very close to the 30 percent limit imposed by China's securities regulations.

The limit applies to all holdings acquired through the Qualified Foreign Institutional Investor or Renminbi QFII programs or through the Shanghai-Hong Kong Stock Connect.

The limit for any individual foreign investor is 10 percent.

The stock exchange in Hong Kong said that buying orders were halted before foreign investors could hit the red line of 30 percent, to avoid compulsory selling of their stocks.

Sell orders are still being accepted.

Buying by foreign investors can restart once the level falls below 26 percent, the exchange said.

Shanghai International Airport shares soared 7.2 percent to 30.54 yuan ($4.99) on Wednesday.

Sectors including consumption, materials, Internet and technology, and financial services are being overweighted by foreign investors, according to Yang.

A research note by Goldman Sachs Group Inc last week said that it recommended remaining overweight in insurers, brokers, property and technology firms.

These shares are well-positioned in an easing liquidity environment and offer investors exposure to growth in China, the bank said.

Capital has been flowing into the mainland's stock market from overseas investors since the Shanghai-Hong Kong Stock Connect kicked off late last year.