The death toll from the virus outbreak rose sharply to 132 with nearly 1,500 new cases, and countries continued to impose travel curbs and pull out nationals from Wuhan as fears over the virus grew.
Caution will remain in the market until China contains the outbreak, said KGI Securities analyst Joel Ng.
"Most investors are still assessing its impact on economic growth," he said, adding that Thailand, Cambodia and Hong Kong would be hit as the virus is likely to affect 50% of outgoing Chinese tourists.
Asian equities advanced in early trade, tracking Wall Street's gains and after the World Health Organisation expressed confidence in China's ability to contain the spread of the virus.
However, they lost momentum as Hong Kong played catch-up with the rest of Asia, dropping nearly 3% on opening after the Lunar New Year holiday.
Singapore shares climbed after Tuesday's near 2% drop, helped by industrial and consumer stocks.
Jardine Strategic Holdings rose nearly 1.4%, while beer manufacturer Thai Beverage tacked on 1.9%.
Philippine shares were headed for a third straight session of losses, with financials and industrials being the major drags on the index.
Conglomerates Ayala Corp and JG Summit Holdings lost 1% and 2.4%, respectively.
Malaysian shares were on track for a seventh straight session of losses, as healthcare and utilities stocks ran out of steam after a robust performance in the previous session.
Glove makers Hartalega Holdings and Top Glove Corp fell 2.9% and 3.7%, respectively, while hospital owner IHH Healthcare lost 1%.
Electricity supplier Tenaga Nasional, the third-largest stock on the index, dipped over 1.7%.
Indonesian shares added 0.7%, buoyed by a 1.8% gain in telecom giant Telekomunikasi Indonesia.
Tobacco company Hanjaya Mandala Sampoerna rose 1.4%, while petrochemical firm Chandra Asri Petrochemical added about 2%.
Thai stocks rose after seven consecutive sessions of falls, helped by financial and real estate stocks, while firm oil prices also provided some support to heavyweight energy stocks.
Meanwhile, data showed December factory output contracted for an eighth straight month but was better than a Reuters poll forecast.
Vietnam remained closed on account of the Lunar New Year holiday. Trading will resume on Thursday.
By Arpit Nayak