Is the Chinese stock market oversold?

Many stock analysts and commentators in China appeared to be most upset by the bearish market prognosis issued from some major overseas investment firms and prominent foreign investors recently. The many counterarguments in the media and on the Internet invariably suggested it was a conspiracy by foreign investors trying to profit by short selling Chinese companies listed in Hong Kong.

However, the influence of foreign investors on the Chinese stock market has been grossly exaggerated. Any serious observer of the Chinese economy would have noticed that those foreign investors have said nothing they didn't already know.

The poor performance of the Chinese stock market in recent months has little to do with it getting a bad rap from abroad. Instead it has got everything to do with what savvy analysts have called the readjustment of investors' expectations.