SHANGHAI, March 29 (Reuters) - 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 U.S. 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. ** Nomura and Credit Suisse warned on Monday they were facing significant losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls. (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)