China’s latest outbreak of Covid-19 appears to be subsiding, and analyst Lorraine Tan believes the economy could get a boost if China eases off on its lockdowns. Despite the ongoing uncertainty, Tan, director of equity research in Asia at Morningstar , believes value remains in Greater China’s equity space, which has been beaten down in this year’s broad market rout. The MSCI China index is more than 15% lower this year amid the Covid-19 lockdowns and regulatory crackdowns. “We think the market is trading at almost about 20% below our fair value estimates. The two sectors that have fallen the most and are looking to be particularly attractive, if we look through the recession risks, would be technology and consumer discretionary,” Tan told CNBC’s “Squawk Box Asia” on Tuesday. Within these sectors, her top picks are chip giant Taiwan Semiconductor Manufacturing Company and fast-food restaurant chain Yum China . She also likes “perennial favorites” Tencent and Alibaba , noting that while growth at both companies has been slowing, cash flow generation remains “fairly robust.” On a broader level, Tan said she looks for companies with the ability to pass on higher inflation risks to their customers. Rising prices in many economies, largely driven by post-pandemic demand and the war in Ukraine, are threatening many companies’ margins and growth. But investors may have to be patient. “We’re looking through the troughs of the cycles, for anybody who’s willing to take a three-year time horizon,” she said. In the shorter-term, Tan believes there are still “a lot of risk” due to commodity price pressures. Against this backdrop, she said dividends will be “very important,” and advised investors to seek “very defensive names with regulated returns.” These include utility stocks with good dividends, she said. “These are likely to continue to outperform over the short term.” ‘Zero-Covid’ implications While the rest of the world has adopted an approach of learning to live with Covid-19, China has stood firm on its “zero-Covid” policy. The world’s second-largest economy has sought to eliminate outbreaks of Covid-19 with tough restrictions, including a two-month lockdown in Shanghai, China’s largest city and key financial hub. Rolling lockdowns have also continued to Beijing and other cities. It has sent consumer sentiment plunging in China. Data from the country’s National Bureau of Statistics showed that the consumer confidence index plunged to 86.7 in April from 113.2 in March — hitting its weakest level since the data was first published in 1991. “I think [an easing of lockdowns] would definitely improve confidence and sentiment. A lot of the uncertainty is China’s consumption demand recovery. So, if that comes up, that will help,” Tan said.