If there’s some grand plan in Beijing for rescuing domestic demand, the Party is playing it pretty close to the vest.

On Monday, Hong Kong shares fell a seventh session in what now counts as the worst streak of daily declines in 21 months.

The city benchmark descended into a bear market last week amid crumbling sentiment and concerns around the precarious state of the Mainland economy. City shares registered losses in 12 of the last 15 sessions.

The Hang Seng China Enterprises Index is likewise beset. It’s on track for its worst month since Xi’s de facto coronation in October, down almost 13%.

The problem on Monday was the lack of follow through in the loan prime rates from last week’s MLF cut. Generally speaking, when the PBoC cuts the one-year MLF rate, the loan prime rates (rates banks charge to their best customers) are lowered a week later. The LPRs are quoted as a spread over the MLF rate. They supplanted the old benchmark rate four years ago.

Last week, the PBoC cut the MLF rate by 15bps, the largest cut since 2020. And yet, the one-year LPR reduction reported on Monday was only 10bps. More irritating for markets: The five-year tenor, a benchmark for mortgages, was left unchanged.

As the figure shows, these cuts aren’t always symmetrical, but under the circumstances, and particularly given the PBoC communication from Sunday, the asymmetry was counterintuitive to some observers.

Plainly, officials remain concerned about stoking speculation in the property market. You might suggest that given outsized cuts to the five-year tenor in 2022 (colloquially: the red bars in the chart are larger than the other bars for last year), Beijing believes additional reductions aren’t necessary. Or that the risk-reward is poor given the demonstrable lack of credit demand among everyday Chinese.

Still, investors are concerned about the property sector, and Xi’s go-to catchphrase about houses being “for living, not speculation” was recently omitted from a key Party communication. To many, that omission suggested Beijing was prepared to countenance some speculation if it meant reviving the most troubled sector of the economy. The unchanged five-year LPR rate felt contradictory in that context.

Some argued the PBoC is trying to protect bank margins, and indeed, officials said as much last week. But this seems an odd time to be prioritizing bank profitability over social stability and sentiment. The official narrative (dutifully parroted by the mainstream financial media and analysts) is that the LPRs are “determined” by banks. While nominally true, that’s about like saying monetary policy in Turkey is the purview of CBT.

It’s possible (I guess) that Chinese banks just weren’t prepared for the MLF cut and didn’t move quickly enough, but if you’re a Chinese bank and Xi wants you to lower the costs of mortgages, that’s what you’ll do. Period. It’s not a debate. So, it does seem clear that with mortgage origination rates at record lows, banks’ margins are a concern for officials in Beijing.

Of course, if that’s the case, the PBoC could always just announce another RRR cut, or take other steps aimed at freeing up banks to lend and lower rates to customers, but then you’re in a race to the bottom. And China isn’t excited about giving up its policy space.

Another narrative bandied about Monday said the unchanged five-year rate was perhaps a clue that bigger things are in the offing. Hope floats. Even vis-à-vis China under Xi.