HONG KONG: China and Hong Kong stocks rebounded on Wednesday, as investor sentiment was propelled by a Reuters report on China planning a record budget deficit for 2025 and Beijing’s call for state-owned companies to boost market value.

The Shanghai Composite index closed up 0.62% at 3,382.21, after dropping 0.73% on Tuesday, while the blue-chip CSI 300 index gained 0.51%.

In Hong Kong, the Hang Seng index was up 161.60 points or 0.82% at 19,815.30, after falling 0.5% in the previous session.

The Hang Seng China Enterprises index rose 1.08% to 7,166.5, while the Hang Seng Tech index jumped 1.8%.

Gains expanded in the afternoon, with most sectors closing higher.

Semiconductors < .CSI931865> and state-owned firms adde d 1.6 % and 1%, respectively.

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

The State-owned Assets Supervision and Administration Commission on Tuesday issued guidelines, urging state-owned firms to improve market value management of listed companies, including measures such as mergers and acquisitions, information disclosure and stock buybacks. Additionally, investors raised bets of more forceful fiscal stimulus after a Reuters report said Chinese leaders have agreed to raise the budget deficit to 4% of gross domestic product (GDP) next year, the highest on record, while maintaining an economic growth target of around 5%.

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

It suggests that “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.