The fund managers increased their suggested equity allocations to 82.1 percent, according to a poll of seven China-based fund managers conducted this week, up from 78.1 percent a month earlier and the highest since June 2015.

Meanwhile, the fund managers reduced their suggested bond allocations for the coming three months to 5 percent from 6.3 percent a month ago.

Recommended cash allocations have dropped to 12.9 percent from 15.6 percent in the previous month.

"In general, no need to be too pessimistic. There are probably some opportunities after the holiday," said one fund manager in Shanghai, adding that there is not too much room for the stock market to decline in the near term.

The fund managers recommended higher allocation to tech and financial stocks, but slightly lower exposure to cyclical sectors such as machinery and metal.

Recent slumps in the tech-heavy ChiNext board has made technology stocks cheaper and consequently more attractive to investors.

The mainland stock market is closed from Jan. 27 to Feb. 2 for the Lunar New Year.

(Reporting by David Lin, Jackie Cai and John Ruwitch; Editing by Jacqueline Wong)