I employ the phrase “interminable malaise” at fairly regular intervals, often in the context of Germany’s so-called “slowcession.” It (the phrase) also applies to Chinese equities.

“Interminable” is a fun word. Dictionaries will tell you it’s usually an embellishment — hyperbole as garnish. But in the context of Chinese stocks, it’s barely an exaggeration. The despondency inherent in both Mainland and Hong Kong shares is unremitting such that rallies, on the rare occasions they occur, feel somehow alien.

The Hang Seng remains more than 50% off its 2021 record high and H-shares nearly 60%. The Hang Seng China Enterprises Index tumbled nearly 2.5% on Monday, taking its January decline to 13%.

As the figure shows, the gauge (which, as a reminder, measures the performance of city-listed Chinese stocks) has now erased the entirety of the bounce which began in November of 2022, when speculation around an end to COVID curbs lured the credulous.

Another bad session would put H-shares at their lowest levels in nearly 20 years. Read that again. At a time when US equities are at record highs, Hong Kong-listed Chinese shares are near two-decade lows.

On the Mainland, things are scarcely better. The CSI 300 is down more than 6% in 2024 already, and as discussed here late last week, investors have adopted an “Anywhere but China” mindset (as BofA’s Michael Hartnett described the thinking among capital allocators).

The persistence of the Mainland rout is remarkable given officials’ attempts to stanch the bleeding.  “Trading in Shanghai and Shenzhen is constantly under the influence of meddling by Chinese regulators,” Bloomberg noted Monday, where “meddling” means everything from short-selling bans to outright state-buying.

And yet, it’s not enough. There’s only so much Chinese authorities can do to put a floor under equities when the frigid chill from overbearing, authoritarian paternalism in Beijing is unrelenting. The figure below gives you a sense of the pressure.

Hong Kong-traded shares are less amenable to state intervention, so underperformance versus Mainland equities is indicative of the selling pressure Beijing is struggling against.

“Short Chinese equities” is the second-most crowded trade on the planet, according to fund managers in a popular monthly BofA survey. Maybe that’s a contrarian indicator. Maybe Hong Kong shares are due for a bounce.

The problem, though, is always (always, always) the same: The market isn’t a market. There are no “fundamental” drivers capable of superseding concerns around Xi Jinping and the extent to which the leadership in China is completely beholden to the vagaries of his “Thought” (a proper noun in this context).

I realize this is a bit repetitive (or at least for regular readers) but that’s actually the point, and it brings us full circle: The selloff in China is entering its fourth year.

At this juncture, helicopter money may be the only option for rekindling domestic demand, which is absolutely critical if Xi really is interested in rescuing sentiment.

Writing last week, after the release of GDP figures and activity data for December, SocGen’s Michelle Lam and Wei Yao said 5% growth will be harder for China to achieve in 2024.

“A revival in animal spirits will likely take much longer without an acceleration in debt restructuring and direct support to households, which we view as essential to get China out of the debt-deflation trap,” they wrote.