Cautious optimism based on low valuations and new leaders' plans for series of economic reforms

Strategists see buying opportunities to invest in Chinese equities, citing low valuations in the market as well as expectations of a better year ahead. However, with any benefits of structural reform taking time to show, volatility is expected to continue.

"We are positive in the near term for Chinese equities as far as the current pricing of asset continues," said Timothy Moe, chief Asia-Pacific Strategist of the Goldman Sachs Group Inc.

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"Although there are legitimate concerns over China, the market has already been through a lot of pain. We believe there is room for a technical rally. However many bearish comments there have been, the market has not gone down but has traded across a very wide range. Eight times in the last two-and-half years the Hang Seng China Enterprises Index went up and down 30 percent. The average duration for each of these moves is between four to six months. Now the market has just come down 18 percent and the valuation is at 1.1 times of the book - a 12-month low. We think there are good reasons to engage in China at the moment."

The investment bank maintains an "overweight" view on China stocks and predicts the CSI300, a benchmark index reflecting mainland's equity markets, to reach 2,880 by the end of 2014, implying a 19 percent return on earnings growth in the year and a gradual confidence in reform development. "Our baseline for China is 7.6 percent gross domestic product growth this year. We believe the overall risk in the financial sector and credit contingency is low," said Moe.

While sluggish exports have dragged growth down in China, the bank is expecting a greater contribution from the sector this year because the atmosphere in developed markets is shifting.

"As an economy largely reliant on exports, China should receive the ongoing tapering in the US as fundamentally positive news," said Helen Zhu, chief China strategist of Goldman Sachs, referring to the US government's declining issuance and purchase of US bonds. "Janet Yellen's decision on Tuesday means there is confidence and optimism in the economy. In the short term, cash outflow is undeniable.

But in the long run, the impact is rather positive especially for Northern Asian markets. External facing industries will benefit."