China’s equity investors have been left stunned by a 20% fall in prices since the beginning of June. This has taken the benchmark Shanghai Composite index beneath the 3000 level that many investors had assumed was a governmentsupported floor, but no support has been forthcoming. Indeed, it is no longer clear what the government could do. Its interventions in the last six months have not had any lasting impact and, by encouraging investors to second guess official intentions, they may have increased volatility. Nonetheless, market fundamentals are more encouraging. Shares in Shanghai are now trading at similar multiples to those in the US for the first time since China’s share prices took off in 2006.
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