SHANGHAI: China stocks ended higher on Monday, as upbeat earnings at industrial firms boosted sentiment, though foreign selling through the Stock Connect programme capped gains.

The blue-chip CSI300 index rose as much as 1%, before closing up 0.2% at 5,046.88, while the Shanghai Composite Index added 0.5% to 3,435.29.

Annual profits at China’s industrial firms surged in the first two months of 2021, highlighting a rebound in the country’s manufacturing sector and a broad revival in economic activity from the coronavirus crisis early last year.

Aiding sentiment, profit growth rose at the country’s major lenders in the fourth quarter of 2020.

Three of China’s largest lenders on Friday booked a jump in fourth-quarter net profit of well over 40%, the first green shoots since the COVID-19 pandemic battered borrowers last year.

Though some analysts remained cautious for the moment.

There are signs that China and the US both are marginally tightening their monetary policies, which could have a mid-term impact on the market, SWS Research analysts said in a note.

For the A-share market, the direction of policy tightening has been further confirmed and a favourable macroeconomic environment has also ended ahead of schedule, the brokerage added.

The CSI300 index has lost nearly 15% this year, led by high-flying sectors including consumer, healthcare and new energy firms. Worries that Beijing could move to rein in bubbles in the country’s financial markets had weighed on the markets.

Foreign investors turned cautious, selling a net 3.5 billion yuan worth of A-shares on Monday via the Stock Connect linking mainland and Hong Kong, according to Refinitiv data, as banks’ warnings on losses soured sentiment.