Goldman Sachs has upgraded its expectations for Chinese stocks, telling investors that shares could go a further 20 per cent higher after a historic rally following Beijing’s pledge to do more to stimulate the economy.

Chinese chip stocks gained $13 billion on Monday as traders expect Beijing to extend stimulus support to the semiconductor industry on Tuesday.

Chinese stocks are on a roll relative to their US peers as optimism over Beijing’s stimulus measures triggered a dramatic rebound. If history is any guide, the rally may have a long way to go, DataTrek Research says.

The recent two-week rally sparked by the unveiling of the People’s Bank of China’s stimulus package has already seen one of the sharpest increases in Chinese equities in history. Goldman Sachs’ analysts said the rally could now have more legs.

China's stock rally could extend another 15% to 20%, Goldman Sachs says. China's equity indexes have jumped dramatically since Beijing announced major stimulus policies. Goldman highlighted still low valuations and diminishing risk as tailwinds for a continued rally.