Following the stock market slide in June that wiped out nearly 3.5 trillion yuan ($566 billion) of market capitalization, many analysts and commentators are repeating the argument that the market's long and painful revaluation process is now complete. At current prices, many Chinese stocks, including the big banks and large State-owned enterprises, are undervalued, they contend.

They may be correct. But if they believe that such seemingly indisputable statistics and analysis can lure investors back to the stock market, they are missing the point. It should have become clear to keen observers of the Chinese stock market that no analytical tool has much effect in swaying market sentiment. What matters to investors now is money flow.

This was made abundantly clear in June when liquidity in the banking system was squeezed by a sudden surge in demand for short-term funds. Much has been written about the mad scramble for funds by many banks, driving up the overnight interbank rate to over 30 percent a year at one point.