Mainland markets rebound
After nursing losses of more than 2 percent for most of the day, China's Shanghai Composite swung back to positive territory in a dramatic fashion to finish 2.2 percent higher. It was the index's first day of trade following an extended weekend.
Earlier in the session, the Shanghai bourse shaved off as much as 214 points to hit its lowest level since May 29 following the release of China's flash HSBC/Markit purchasing managers index (PMI). The flash PMI rose to 49.6 in June, beating Reuters' expectations for 49.4, but it still remained in contraction territory.
Tuesday's wild ride came on the back of last week's 13 percent steep correction, which marked the index's worst showing since the global financial crisis in 2008. Analysts said liquidity concerns were at the forefront of the correction, sparked by new curbs on margin financing and as a series of new-share listings exerted pressure on liquidity.
The blue-chip CSI 300 index also reversed course to close up 3.2 percent, while the smaller Shenzhen Composite index ended up 1.2 percent after a 3.2 percent slump earlier in the day.
According to Reuters, the rebound was backed by fresh buying from local and foreign investors who took heart from reports by domestic state-run media that the bull run isn't over.
However, analysts from HSBC expect the correction to continue in the short term as the country's securities regulator attempt to cool the market. "In our view, the A-share market correction is likely to continue in the short term as the leverage- or liquidity-driven beta rally could be over. The magnitude of the selling could depend on insiders (i.e., senior management and significant or controlling shareholders) who have been selling into the rally," Steven Sun, head of Hong Kong and China equity research at HSBC, wrote in a note.
Read MoreChinese economy healthier than data suggest: Beige Book
Meanwhile, Hong Kong's Hang Seng index advanced 1 percent to touch its peak since June 12.
"There's [a tale of] different China's here. The one that's preferred by the foreigners, which is the H-shares, is more rational and valuations are still at 9x price-to-earning (PE) ratios, while the A-share markets are close to 22-23x PE. The ChiNext is at 80x PE," Bhaskar Laxminarayan, chief investment officer for Asia at Pictet Wealth Management, told CNBC's "Street Signs Asia."