This is what usually happens when people try to prop up share prices. Economist Owen Lamont has studied episodes in which companies resort to various legal actions and market manipulations to keep short sellers from driving down their stock prices. Even when the companies succeed, their share prices usually continue to drift lower. If this is true for a company, it should be similarly true for the Chinese government.
Many analysts say they think China’s stocks still are overvalued. BlackRock’s global chief investment strategist Russ Koesterich was quoted as saying: “Given the magnitude of the run-up [in Chinese share prices], it is possible that even after a 30 percent correction, we haven’t gotten back to something approaching fair value.” Whether he’s right, he’s certainly expressing a widely held view, and that means that pent-up selling pressure might remain.We shall see.