(Yicai Global) Feb. 3 -- Chinese fund managers are cautiously optimistic about the recovery of the country's stock markets, despite them closing an average 7.7 percent lower yesterday as they re-opened after the extended Chinese New Year holiday and the continued outbreak of the novel coronavirus from Wuhan.

The Shanghai Composite Index closed 7.85 percent lower at 2,743.01 yesterday, while the Shenzhen Stock Exchange slid 8.45 percent to 9,789.96 and the growth-focused ChiNext Price Index lost 6.85 percent to finish at 1,799.77. All industries declined and more than 3,000 stocks wound up lower.

"We had anticipated a decline from emotion-based investing, but the market response was more intense than expected," Xia Fengguang, a private equity fund manager, told Yicai Global. The drop was especially more drastic than forecast among low-volatility blue-chip stocks, he added. Xia now plans to invest more cash into affected companies and has set aside funds for any changes coming up in the short- and mid-term future.

China has been plagued over the past two weeks by a deadly coronavirus that leads to pneumonia and has claimed more than 400 deaths to date, according to official figures. Several countries have grounded flights direct to and from the country and many airlines have reduced or cut their routes to China as the disease extends its reach worldwide.

 "Though the epidemic is controllable long term, short-term market sentiment is unpredictable," he continued. "But as long as the value of a company remains the same and it can create satisfactory returns for shareholders, when shares are cheap it's time to buy more."

Liu Yanchun, fund manager at Invesco Great Wall Fund Management, agrees the epidemic will not have a major impact in the medium and long term and sees no reason to panic. A wise strategy would be to find stocks that are suffering from the virus short term but have a clear strategy for long-term growth.

"The epidemic is a temporary blip in China's social and economic activity and will mostly impact just the first quarter," added Wei Fengchun, chief macro strategy analyst at Bosera Asset Management. There are plenty of mid-term investment opportunities and investors should be gradually adding more equity into their portfolios, he said, saying there is limited room for the markets to fall further so long as the virus is contained.

Mao Junyue, investment director at Xinpu Investment, was one of the more pessimistic market players. He believes the Chinese market was nearing the end of a rebound and that the epidemic is only exacerbating the otherwise-pending correction.

Editor: Tang Shihua