HONG KONG: Chinese and Hong Kong stocks rallied on Tuesday, driven by banking gains, after reports of Beijing’s planned $411 billion special treasury bond issuance for 2025.

The Shanghai Composite index added 1.3% to 3,393.53 and the blue-chip CSI300 index jumped 1.3% at close.

Gains widened in the afternoon session after Reuters reported that Chinese authorities have agreed to issue special treasury bonds worth 3 trillion yuan ($411 billion) next year, the highest on record, as Beijing ramps up fiscal stimulus to revive a faltering economy.

The proceeds will be used to boost consumption via subsidy programmes, equipment upgrades by businesses and funding investments in innovation-driven advanced sectors, among others.

Hong Kong’s Hang Seng Index closed 1.08% higher to 20,098.29 - a near two-week high - in holiday-thinned week.

Financial markets in Hong Kong will be closed from this afternoon through Thursday for a local holiday. Trading will resume on Friday.

Banks extended Monday’s rally, leading gains onshore, as investors continued to seek shelter in high dividend-yielding assets amid falling bond yields. The gauge tracking the sector added 1.3% to over a two-month high.

China’s four biggest state-owned banks - Industrial and Commercial (ICBC), Bank of China (BOC) China Construction Bank (CCB) and Agricultural Bank of China (ABC) - gained between 1.2% and 1.9% to hit multi-year highs.

Adding to the gains, chips pared losses to rise 1.7% after the Biden administration announced a last-minute trade investigation into older China-made “legacy” semiconductors that could heap more US tariffs on Chinese chips.