Fears over a bird flu outbreak in China sent markets tumbling to multi-month lows on Monday, casting doubt over whether 2013 could still be the breakout year for Chinese equities.
Opening for trade after a two-day holiday last week, the Shanghai Composite fell close to 2 percent on Monday to its lowest level since December 25 while the Shenzhen Composite hit a near 3-month low. Meanwhile, Hong Kong's Hang Seng Index hit its weakest level since November at 2,612 points. All three indices have managed to pare some losses since hitting those lows.
The early falls were triggered by reports over the weekend that confirmed 21 reported cases of bird flu with the death toll rising to six.
Aviation stocks suffered the brunt of the losses with Shanghai-listed Air China falling nearly 4 percent, China Eastern Air losing 3.5 percent and Shanghai International Airport slipping over 4 percent.
But is Monday's sell-off merely a knee-jerk reaction or could it lead to a prolonged downtrend?
"We can all safely say we've seen this movie before. We saw in 2009 with swine flu when stocks were off about 10 percent, rebounded very quickly within a month and then doubled," said Timothy Ross, head of Asia Pacific Transport Research at Credit Suisse on CNBC's "Cash Flow."
Analysts at Citi Equity Strategy wrote in a note Monday that "the avian flu may have limited impact on economic growth and this incident may hurt investment sentiment in the very near-term."
They added that in 2003 when the SARS (Severe Acute Respiratory Syndrome) epidemic broke out, the Shanghai Composite proved to be resilient: "The Chinese equity market held off well at the time when the economy was poised to take off after a few years of adjustment."
(Read More: China: Time of Transition)
The Shanghai Composite notched up gains of over 11 percent in 2003 after SARS was first reported in the spring of that year.
Analysts recommend using the current decline as a buying opportunity, especially for transportation stocks.