(Bloomberg) — Chinese stocks fell as a lockdown in Shanghai to combat a virus flareup raised worries over disruptions to business operations and the toll on economic growth.

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The CSI 300 Index was down 0.9% as 1:38 p.m. local time as the city said it will lock down in two phases to conduct a mass testing blitz. The gauge pared earlier losses of as much as 2%, supported by gains in energy shares while the latest Covid-19 curbs dragged consumer names lower. In Hong Kong, a rally in tech stocks saw the benchmark reverse early declines.

Lockdowns add uncertainties to the outlook for Chinese equities, with investors already grappling with regulatory headwinds including a potential delisting of domestic firms from American exchanges, and the fallout from the war in Ukraine. Shanghai is home to the Chinese headquarters of many international companies and the country’s largest port.

The energy sub-gauge for CSI 300 surged as much as 5.5%, headed for its highest close since 2018, as a budget breakdown released by the Ministry of Finance offered hints of subsidy payments to the renewables sector. The Hang Seng Index was up 1% as food delivery giant Meituan led tech stocks higher after its earnings.

China’s zero-tolerance approach to the virus is putting pressure on growth, even as authorities pledged strong support for the economy and markets via a slew of initiatives earlier this month. The CSI 300 Index is down more than 16% this year, the worst-performing national gauge in the region.

“Investors are cautious about economic growth pressure from the further spread of Covid resurgence and the strict measures that could follow to contain the virus,” said Castor Pang, head of research at Core Pacific-Yamaichi Intl HK. “The partial lock down in Shanghai and the potential spread out into other regions will make it even harder for China to achieve the 5.5% GDP growth target, considering this year’s weak starting point.”

Shanghai’s stock exchange said it will provide online services over IPO approval meetings, consultations and road shows, while also extending the time window for listed companies’ statement releases to 11 p.m.

Analysts are expecting Chinese authorities to further ramp up stimulus to aid the economy, though that may prove insufficient to turn around flagging market momentum. An opinion piece on the front page of the official Securities Times Monday said that China’s monetary policy needs to focus on domestic conditions and authorities need to conduct the “timely” release of policies.

Still, not everyone is pessimistic. Goldman Sachs Group Inc. maintained an overweight stance on mainland and offshore China stocks, forecasting 22% upside over the next 12 months for the MSCI China Index.

Macro momentum should start to pick up in the second quarter on monetary, fiscal, and property easing, and a more pragmatic approach to contain Covid spread should “partially ease growth fears”, strategists including Kinger Lau wrote in a note.

Foreign funds were net buyers of yuan-denominated stocks in Monday’s session after selling a net $2 billion worth of shares last week via exchange links with Hong Kong, Bloomberg-compiled data show.

(Updates with foreign funds data, latest market prices)

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