At the midday break, the Shanghai Composite index rose 0.72% to 3,385.64 points after dropping 0.73% yesterday to close at the lowest since Nov 29, while China’s blue-chip gained 0.52%.

Chinese H-share index in Hong Kong, the Hang Seng China Enterprises Index added 0.86% to 7,166.5.

The Hang Seng Index advanced 0.58% at 19,815.30. It lost 0.5% in the last session.

Most sectors gained by midday, led by semiconductors and state-owned firms adding 2% and 1.2%, respectively.

State-owned firms listed in Hong Kong climbed 0.8%.

The rally comes after the State-owned Assets Supervision and Administration Commission (SASAC) issued guidelines yesterday, urging state-owned firms to improve market value management of listed companies, including measures such as mergers and acquisitions, information disclosure and stock buy-backs.

Investors raised bets of more forceful fiscal stimulus next year after a Reuters report said Chinese leaders have agreed to raise the budget deficit to 4% of gross domestic product (GDP) next year, highest on record, while maintaining an economic growth target of around 5%, citing sources.

Morgan Stanley called the potential plan positive, citing the report.

Beijing is willing to set a high growth target and record fiscal budget to boost market confidence,” the brokerage said, adding that details will unlikely be known until March.

The smaller Shenzhen index gained 0.74%, the start-up board ChiNext Composite index added 0.11% and Shanghai’s tech-focused STAR50 index jumped 1.16%​.

Around the region, MSCI’s Asia ex-Japan stock index firmed 0.27%, while Japan’s Nikkei index slipped 0.54%.