It was elementary that a tale of two markets would come to an abrupt parting of the ways that would not be good for small mainland investors. Over the past year and particularly recently, the American and Chinese markets have risen strongly. A resurgence of economic expansion in the US, while euro-zone growth languishes, has underpinned a recovery on Wall Street to new highs. At the same time, the Shanghai stock market rose even more strongly, despite a slowdown in the mainland economy and economic fundamentals that pointed to more weakness. This was clearly not right. The sell-off on Monday, which wiped 7.7 per cent off the Shanghai benchmark index in the biggest daily drop in more than six years, should not have come as a surprise. It followed a crackdown on brokerages' margin-trading business and tightened supervision of shadow-banking products. The China Securities Regulatory Commission (CSRC) banned three brokerages - Citic Securities, Haitong Securities and Guotai Junan Securities - from opening new margin-trading accounts for three months after they were found to have illegally rolled over margin-trading contracts for clients. The rout still left the Shanghai index up more than 50 per cent in the past six months as a result of an influx of fresh capital and it has quickly clawed back losses. But the tale is a cautionary one for mainland investors. The fundamentals never supported such a spectacular rise. The sell-off shows that the mainland stock markets have still not broken out of the boom-and-bust cycle, prompted mainly by excessive official interference in the market in the past. That said, it is no reason for the government to refrain from regulatory intervention to stamp out unhealthy irregularities. It has to be remembered that mainland stock markets are compared to casinos, with tens of millions of punters who do not study balance sheets or tap into research or analyses used by professionals. They have been buying stocks with a herd instinct fed by speculation and rumour. Boom-and-bust cycles usually end up with the small investor getting burned rather than major speculators. The latest one is no exception. If ordinary punters learn the lesson and allow themselves to be guided more by the fundamentals, some good will have come out of this sell-off. They must look out for themselves. The CSRC has a duty to regulate the markets and in the process, hopefully, make them more transparent.