The Chinese government is calling a bottom to the dramatic fall in Shanghai stocks. Should the market go along with it?

Last week, there were two measures to stop the fall, which saw the Shanghai Composite drop 50 per cent from its peak in October. First, the government imposed restrictions on how fast newly public companies could float shares that had been “locked-up”. New issues have been a big factor in the sell-off. Total market capitalisation rose by 29 per cent in three months after the index peaked – a period in which the index fell 10 per cent. But the latest restrictions are only postponing the inevitable as those shares will come to the market at some time.