For many Chinese equity investors, 2010 meant more despair than cheer.

While the economy picked up steam, the Shanghai Composite Index tumbled more than 14 percent in 2010, one of the worst performances among major global markets. The CSI 300, an index of China's top 300 stocks, nosedived 14.3 percent while the Shenzhen Composite index, which tracks the country's second bourse in Shenzhen plunged 11.4 percent.

The bearish sentiment gained traction amid growing fears over the economic slowdown and inflation that may require aggressive policy measures to soak up excess liquidity. The central bank has told commercial banks to slow their pace of lending and also raised the ratio of deposits that banks must set aside in reserve seven times.

But many analysts and investors reckon that the recent market decline represents a buying opportunity, rather than the start of a long-term bear market.

"Valuations are still far from the over-stretched levels seen in 2007 when rate hikes induced more profit taking," said Helen Zhu, a senior analyst at Goldman Sachs. "There are still some significant contributors to a rosy market prospect. The domestic macro-environment is robust; fiscal policies are supportive and monetary policies are more selective but still relatively accommodative. Despite likely weak external demand, we believe China will gradually decouple by stimulating domestic growth, both in consumption and investment."

Jerry Lou, an analyst at Morgan Stanley, agreed. "The market's downside risks should be very limited," said Lou. "Cheap valuations, solid corporate earnings visibility, contained inflation risk with stable monetary policies, and strong currency will provide support to equity markets in 2011."