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SHANGHAI, April 1 (Reuters) - Chinese stocks jumped to fresh seven-year highs on Wednesday on hopes that the country's troubled factory sector was regaining traction, and as retail investors continued to flock to Asia's best performing market betting on further gains.
An official factory survey showed activity expanded in March for the first time in three months, although growth was marginal and orders remained weak, reinforcing calls for further policy easing by the government to bolster a slowing economy.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 1.8 percent, to 4,123.90 points, while the Shanghai Composite Index gained 1.7 percent, to 3,810.29 points.
Retail investors continued to pile into shares in expectation of further gains, though both indexes looked technically overbought after surging some 16 percent in the first quarter.
Last week, 1.67 million new stock accounts were opened in China, a 50 percent surge from the previous week, hitting historical highs.
A Reuters poll published on Tuesday showed that analysts forecast the SSEC would end the year at 4,000, its highest since early 2008 and about 5 percent higher than the current level.
But 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, another Reuters poll showed.
Banks underperformed the broader market after China announced it would introduce a scheme to insure bank deposits from May 1, a move analysts say would accelerate the pace of interest rate liberalisation and hurt lenders' margins.
Among the most active stocks in Shanghai were Bank Of China , up 0.9 percent to 4.42 yuan; Agricultural Bank of China, up 0.5 percent to 3.69 yuan and United Network, up 10.1 percent to 6.02 yuan.
In Shenzhen, TCL Corp, up 7.1 percent to 6.32 yuan; BOE Technology, up 1.7 percent to 4.10 yuan and Zhongtian Urban, down 0.7 percent to 14.13 yuan were among the most actively traded.
Total volume of A shares traded in Shanghai was 44.6 billion shares, while Shenzhen volume was 28.7 billion shares.
Reporting by Samuel Shen and Pete Sweeney; Editing by Kim Coghill