"People are overly panicky," said Xu.

"I am still quite bullish on the Chinese economy and the A-share markets on the one-to-three-year horizon."

Xu said he planned to buy new economy stocks that could benefit from economic transformation, as well as those in old economy sectors such as commodities.

The yuan climbed 0.2 percent to 6.5416 yuan/dollar in Shanghai after the People's Bank of China raised its reference rate by 0.1 percent to 6.5385, according to Bloomberg.

Chen Yulu, vice-governor of PBOC, said on Tuesday there is no foundation for yuan devaluation because its exchange rate will remain steady, based on its relation with a basket of currencies.

China's manufacturing activity contracted for a seventh straight month in February with the Purchasing Managers Index falling to 49, down from January's 49.4, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing on Tuesday.

Hong Hao, chief strategist at BOCOM International Ltd, said the weak PMI data were influenced by the Spring Festival and China's focus on infrastructure investment in the second half of last year, which cannot be quickly reflected on economic data.

"The economy and stock market are looking good long term. But the short term is less certain unless the fundamentals improve or important policies are announced," said Hong.

Li Xiang contributed to this story.