* CSI300 +1.6 pct; SSEC +1.4 pct; HSI +0.7 pct
* Retail investors pile in; some fund managers cautious
* HK's GEM jumps after China relaxes insurers' investment rules
By Samuel Shen and Pete Sweeney
SHANGHAI, April 1 (Reuters) - Chinese stocks rose more than 1 percent on Wednesday after surveys showing the country's factory sector unexpectedly picked up in March, as retail investors continued to flock into a bullish market analysts say will rise further.
Hong Kong stocks also rose, with start-up shares surging, after China allowed insurers to invest in the city's Growth Enterprise Market.
The official Purchasing Managers' Index (PMI), released on Wednesday, edged up to 50.1 in March from February's 49.9, indicating that factory activity is expanding but remained weak.
In a strategy report published on Wednesday, China Southern Asset Management Co said it did not expect strong stimulus measures, but "the trend of monetary easing will continue, with relatively big room for cuts in interest rates and banks' reserve ratios".
The fund manager forecast the market would remain bullish throughout the year.
Market optimism was also reflected in a Reuters poll published this week, with analysts forecasting the benchmark Shanghai Composite Index would end the year at 4,000, its highest since early 2008 and about 5 percent higher than the current level.
Retail investors continued to pile in. Last week, 1.67 million new stock accounts were opened in China, a 50 percent surge from the previous week, and near historical highs.
Meanwhile, both China's stock turnover and the amount of margin financing - money investors borrow to buy stocks - have repeatedly hit fresh highs in recent sessions.
Reflecting concern that the mainland market may be overheating, Chinese fund managers cut the proportion of their portfolios to be invested in stocks over the next three months to a six-month low, a Reuters poll showed.
The CSI300 index rose 1.6 percent to 4,114.87 at the end of the morning session, while the Shanghai Composite Index gained 1.4 percent to 3,799.85. The Hang Seng index added 0.7 percent to 25,064.63.
China's Nasdaq-style ChiNext board jumped more than 2 percent to fresh highs and is now trading at about 90 times companies' earnings.
"In terms of average daily turnover in (China's) small caps, it's already definitely a big bubble," said Lu Wenjie, a strategist at UBS.
"ChiNext is beyond the support of fundamental factors. We just don't know when the music will stop."
He said that increasing risks in the ChiNext and the huge valuation gap between China and Hong Kong would lead more mainland investors to invest in Hong Kong stocks.
Hong Kong's Growth Enterprise Market (GEM) jumped nearly 4 percent on Wednesday morning, far outperforming the Hang Seng index after China relaxed overseas investment rules for insurers and allowed them to invest in GEM.
Stock trading on the Hong Kong exchange hit US$19.2 billion on Tuesday, the highest since January 2008, as the local market plays catch-up with China's stock market. (Editing by Alan Raybould)