SHANGHAI: Shares in mainland China closed at multi-year highs on Wednesday, extending their winning streak to the seventh session, as hopes of an economic recovery, regulatory and retail support sustained the market's unabating rally.

At close, the Shanghai Composite index was 1.7% higher at 3,403.44, its highest closing level since February 2018, while the blue-chip CSI300 index ended up 1.6%, at its highest closing level since June 2015.

The CSI300's financial sector sub-index jumped 2.6%, the consumer staples sector gained 0.3% and the real estate index 0.1%.

The smaller Shenzhen index rose 1.9% and the start-up board ChiNext Composite index was higher by 2.3%, trading at its highest in almost five years.

Surging volumes and a deluge of foreign money propelled equities last week after the government mouthpiece China Securities Journal called for a healthy bull market to aide Beijing's diplomatic hand on Monday.

Morgan Stanley raised target prices for the CSI300, MSCI China, Hang Seng and H-share indexes. UBS' analysts said in a note on Wednesday the CSI300 could edge higher in the next three to six months on "buoyant earnings estimates for next year rather than a valuation re-rating."

"The recent sharp rally in China's CSI300 Index reminds us this is an inefficient, retail-driven market," Nicholas Yeo, head of China equities at Aberdeen Standard, said in written comments. "What's important is not to follow the market blindly."

The Shanghai index is up 11.6% and the CSI300 has risen 16.5% so far this year. Shanghai stocks are up 14% so far this month. About 58.71 billion shares were traded on the Shanghai exchange. The volume in the previous trading session was 65.78 billion.