Here's what stock-market investors are getting wrong about China and its zero-COVID policy, economists say

Investors took some cheer this week from China’s latest COVID policy after massive anti-lockdown protests erupted across the country, rattling global financial markets, but economists think that markets have placed a “too high probability” on restrictions being relaxed soon.

U.S. stocks finished nearly flat on Tuesday after the Dow Jones Industrial Average DJIA, +1.49% dropped nearly 500 points in the previous session. Hong Kong’s Hang Seng Index HSI, +2.16% jumped 2.2% on Wednesday, booking a monthly gain of over 25%. It is the largest one month percentage gain since 1998, according to Dow Jones Market Data.

“I think the markets have taken a half glass full approach to the situation. There’s definitely investors who are looking at the bright side of this and hoping for an end to zero-COVID in the near future,” said Jonas Goltermann, senior markets economist at Capital Economics.

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