SHANGHAI: China’s shares dropped on Wednesday after a long weekend, weighed by the country’s most severe COVID-19 wave since the Wuhan outbreak and a survey showing March services activity contracted at the steepest pace in two years.

The blue-chip CSI300 index fell 0.3% to 4,263.84, while the Shanghai Composite Index was flat at 3,283.43 points.

The Hang Seng index fell 1.9% to 22,080.52, while the China Enterprises Index lost 2.1% to 7,608.80 points.

The Caixin Services Purchasing Managers’ Index (PMI), which focuses more on small firms in coastal regions, dived to 42 in March from 50.2 in the prior month, as the surge in coronavirus cases restricted mobility and weighed on client demand.

“Global investors should be paying more attention to China’s lockdowns as the market may be underestimating the economic impact,” Nomura analysts said in a note.

Some 23 Chinese cities are under total or partial lockdown, affecting an estimated 193 million people in areas accounting for 22% of China gross domestic product, according to Nomura’s own survey.

Tourism and transport stocks lost 0.3% and 0.8%, respectively as the number of journeys taken over China’s Tomb Sweeping Festival holiday tumbled by nearly two-thirds from last year.

Semiconductors slumped 3.4%, new energy shares dropped 2.8% and consumer staples retreated 1.1%.

However, real estate developers jumped 2.4%, banks added 1.4% and infrastructure shares rose 2.8% on expectations of more stimulus to support the economy.

Shares of digital currency-related firms rose after China’s central bank said it would expand a pilot scheme of its digital currency, e-CNY, to more areas and promote its research and development.