SHANGHAI: China and Hong Kong stocks closed roughly flat on Tuesday as concerns over the worsening COVID-19 situation offset optimism from recovering services activities in the country.

The blue-chip CSI300 index ended down 0.1% at 4,489.54, while the Shanghai Composite Index ended flat, at 3,404.03 points.

Sentiment in China was curbed by signs of a flare-up in COVID-19 infections, despite data showing China’s services activity snapped three months of decline in June and grew at the fastest rate in almost a year.

The total number of domestically transmitted cases jumped to 173 from 27 on a seven-day moving average basis, and the number of cities under lockdown or partial lockdowns doubled, Nomura said in a note.

“Over the past week, the COVID-19 situation has clearly worsened,” wrote Ting Lu, Nomura’s chief China economist. “Another wave of Omicron could prompt a return to a downswing phase, even though the timing of such an occurrence is uncertain.” Although the Caixin services PMI bounced back to the expansionary zone, “the highly uncertain COVID-19 development still poses persistent pressures on the future recovery of the service sector, which calls for sustained and targeted policy support,” HSBC wrote on Tuesday.

Tourism and food & beverage shares fell in China, but steel, resources and infrastructure stocks rose.