Recently, the A-share market has faced a tumultuous downturn, making headlines as the Shanghai Composite Index slipped below the significant 3000-point barrier on June 21, reaching a notable low of 2933.33 points just days later on June 26. However, an unexpected shift occurred in the afternoon of June 26, as the index rebounded sharply, ending the day higher by 22.53 points, which translates to a 0.76% increaseThis sudden recovery saw more than 4800 stocks rise across the two markets, instilling a sense of cautious optimism.

This wave of recovery appears to have been influenced by a crucial announcement aimed at stabilizing China's capital markets, with a high-level meeting reportedly focusing on ways to bolster and ensure the qualitative development of the financial landscapeAttendees at this meeting included representatives from major financial organizations such as the China Investment Corporation, the Central Huijin Investment, as well as several leading securities firms

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The precise details remain unverified, but market speculation suggests that investors are hopeful regarding the management’s commitment to intervene and stabilize the increasingly volatile market.

Investor sentiment is particularly heightened following earlier affirmations from officials who emphasized the need for more diverse policy instruments to tackle market fluctuationsGiven this context, the rising expectation for government interventions—especially after the alarming breach of the 3000-point threshold—feels entirely justifiable since maintaining stability in the capital market is a fundamental responsibility of regulatory bodies.

With this backdrop, it begs the question: what concrete measures should be implemented to support the current A-share market and ensure degrees of stability? Several key actions could be considered essential to navigate these tumultuous waters.

First and foremost, there is a pressing need to impose bans or restrictions on various short-selling mechanisms

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Actions like halting the practice of securities lending and quantitative trading, which are significant catalysts for short-selling pressures, should be firmly tackledSuch measures are critical for restoring investors' confidenceFurthermore, steps should be taken to limit securities borrowing by disallowing new securities lending positions while transitioning from a T+0 to a T+1 model for such operationsMoreover, controlling short positions in stock index futures should be a priorityOverall, any tools enabling short-selling within the A-share market must be decisively curtailed or strictly limited.

In addition to these measures, a suspension of Initial Public Offerings (IPOs) should be implemented, specifically stating that any IPO actions must cease below the 3000-point markFollowing a period of extensive market stagnation coupled with shifts in IPO policies, the resumption of IPO approvals and reviews on June 21 raised concerns among investors about the potential acceleration of new stock releases

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This contributed significantly to the Shanghai Composite's falling under 3000 pointsThus, enacting a moratorium on IPO activities below this threshold would serve as a stabilizing measure—perhaps a mandate to pause new listings until the index stabilizes above 4000 points.

Another crucial strategy would involve halting share reductions by major stakeholders, which includes significant shareholders, controlling shareholders, and members of the board during times when the index falls below 3000. Even when the index is above this level but the market has not returned to normalcy, reductions should remain frozenOnly when the market shows signs of recovery should the previous norms around share reductions be reinstated.

Moreover, active and positive initiatives must be taken to invigorate the marketThis can include increasing investments from state-backed entities like Central Huijin and the National Council for Social Security Fund, as well as encouraging public companies to embark on share buybacks or for major shareholders to increase their holdings

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The sincerity behind such purchases is paramount; these actions should reflect genuine commitment rather than mere opticsThus, buybacks and increases must command substantial amounts and be conducted swiftly, with preferences for cancellation-style buybacks to effectively enhance investor confidence.

From a longer-term perspective, addressing the root causes of the A-share market's instability necessitates systemic reformsAn essential reform would be to refine the structure of shares for IPO companies, perhaps governing major shareholders' ownership to no more than 30% or mandating that newly issued shares must remain freely traded in a ratio of at least 50%. Introducing non-circulating shares, wherein a portion (around 15%) of significant shareholders’ stakes remain unlisted, while allowing for inheritance or offline stock transfers, would avoid leaving companies in a state of limbo when major stakeholders choose to exit.

Equally important is the strengthening of investor protection mechanisms, which includes compensating investors for losses incurred during turbulent market periods