TMTPOST -- U.S.-listed Chinese shares rallied Friday on investors’ expectation of hundreds of billions of dollars’ fiscal stimulus to be unveiled this weekend.

Credit：Xinhua News Agency

The Nasdaq Golden Dragon China Index, which tracks 65 China-exposed U.S.-listed companies, pared as much as 1.9% losses at morning trading and closed 0.9% higher Friday. The index outperformed the U.S. stock market as the benchmark S&P 500 edged up 0.6% to a new record close.  The American depositary receipts (ADRs) of three Chinese electric vehicle makers--Xpeng, Li Auto and Nio settled 1.9%, 0.7% and 0.3%, higher respectively, after sliding more than 3% midday. Shares of of Temu operator PDD gained about 2.3% while its domestic e-commerce rivals JD.com and Alibaba Group rose 1.4% and 0.8%, respectively.

Chinese stocks climbed as investors are expecting Beijing prepares fresh policies to boost the world’s second largest economy over the weekend. China's Ministry of Finance will hold a press conference on Saturday. The Minister of Finance Lan Fo’an will outline how the government agency will “intensify counter-cyclical adjustment in fiscal policy to promote high-quality economic development" and answer questions from reporters, according to the State Council Information Office (SCIO).

15 out of 23 market participants estimated Chinese finance minister will announced RMB2 trillion (US$283 billion) in fresh fiscal stimulus at the press briefing on Saturday, Bloomberg cited results of a survey it conducted Friday. Two participants didn’t respond. Only one participant anticipated additional stimulus would be RMB1 trillion, while another bet RMB3 trillion in new aid and four projected more than RMB3 trillion.  Most of the respondents expect the funding to come in the form of government bonds. 

Compared with the amount of new fiscal package,the target of support seems more important as it will signal where the Chinese government looks to steer its economy. “The stimulus should be multi-year and targeted to households and not restarting the real estate investment-led growth story,” said Pushan Dutt, professor of economics at INSEAD. “It is the focus of the stimulus rather than the size that is important.”

The upcoming fiscal package will likely be focused on stimulating domestic demand, supporting recapitalization of banks, as well as local government debt restructuring, Chetan Ahya, chief Asia economist at Morgan Stanley, spoke to CNBC’s television business program “Street Signs Asia”. The consumer stimulus measures could be targeted at social welfare spending, with an aim to free up more household savings, and a small portion of the package could be dedicated to support consumer trade-in programs, Ahya said.

At a press conference on Tuesday, the National Development and Reform Commission (NDRC), China’s top economic planner, pledged a raft of economic stimulus at press conference, though it still fell short of investors’ anticipation of a much larger package of stimulus measures.

Economists at Morgan Stanley predicted that the Ministry of Finance will deliver a modest supplementary fiscal package at the press conference — which they called China’s “second chance to convince the market” after Beijing undershoot Tuesday. However, the economists conceded that expectations are high.

“Higher size with clear consumption stimulus portion, or clear forward guidance for next year’s expansionary policy, would constitute a positive surprise,” the Morgan Stanley economists wrote.