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China Bulls Have Got It Wrong as Covid Zero Stays, Lombard Says

A resident at a Covid-19 testing booth in Pudong's Lujiazui Financial District in Shanghai on June 20.

A resident at a Covid-19 testing booth in Pudong's Lujiazui Financial District in Shanghai on June 20.

Photographer: Qilai Shen/Bloomberg

Investors who are betting on a sustained rebound in Chinese equities are getting ahead of themselves, according to TS Lombard.

The optimism surrounding China’s shares is growing but the nation’s Covid Zero policy remains a drag as it curbs consumer spending, which is a key driver of growth, analysts Larry Brainard and Jon Harrison wrote in a note Monday. The firm lowered its call on Chinese stocks to neutral from moderately positive.