Did your stock suddenly go "to jail"? Read this article to understand the truth about Taiwan's handling of stocks.

Have you ever experienced this—buying a stock that suddenly skyrockets, gaining over 100% in a month, and originally planning to make a big profit, only to find that trading becomes strange, with only one transaction every 5 minutes, and no margin trading allowed? At this point, your stock is very likely already on the disposal list.

Why Do Stocks Enter Disposal Status?

The Taiwan Stock Exchange has a disposal stock system mainly to “cool down” overheated trading. When a stock exhibits abnormal short-term performance—such as excessive price swings, soaring turnover rates, or skyrocketing trading volume—these are signals that trigger disposal status.

The logic behind this system is actually simple: the crazier the trading, the stricter the regulation. It’s a progression from normal stock → watchlist stock → warning stock → disposal stock, similar to green light → yellow light → red light.

In December 2023, the Taiwan Stock Exchange designated 10 stocks as disposal stocks at once, including Evergrande, Lishan, Hongguang, etc., showing how common such abnormal trading behaviors are.

What Does Disposal Mean? How Is It Different from Regular Stocks?

Simply put, disposal stocks are stocks with trading restrictions. They can still be bought and sold, but trading becomes very inconvenient:

Stocks in disposal status are usually “locked down” for 10 trading days. During this period, margin trading is unavailable, making trading much more difficult. Investors jokingly call it “going to jail.”

Disposal Stocks Have Two Levels, With Completely Different Restrictions

First Disposal: Not the Strictest Yet

When a stock is first added to the disposal list, trading is manually controlled, and only one match every 5 minutes. If a single buy or sell order exceeds 10 lots, or the total buy and sell orders exceed 30 lots, circle deposit trading is required—that is, you must pre-fund the account, and the system will deduct from your pending funds first, then from your bank account if insufficient.

In this case, trading volume usually shrinks, but it’s not overly exaggerated.

Second Disposal: Trading Becomes Extremely Inconvenient

If the stock continues to perform wildly during the first disposal period and meets disposal criteria again within 30 days, it enters the second disposal—an upgraded “lockdown.”

At this stage, trading restrictions double: only one transaction every 20 minutes, and all trades, regardless of size, must be circle deposit trades. As a result, liquidity dries up significantly, and trading volume often plummets.

The duration of both levels of disposal is generally 10 trading days, but if the stock’s daily transaction volume during disposal exceeds 60%, the disposal period extends to 12 trading days.

Do Disposal Stocks Rise? Two Real Cases Tell You the Answer

Regarding the future trend of disposal stocks, there’s a saying in the market: “The more they’re restricted, the bigger the tail”—sounds tempting, but the actual situation depends on the individual stock.

Wings Electronic (6756) is a typical example. This stock was listed as a disposal stock in June 2021. It moved from first to second disposal, and during this period, its stock price actually increased by 24%. Why? Because it’s a hot stock that, after being “locked down,” became an investment opportunity—its chips stabilized, and the main funds’ movements became clearer, turning into a buying point.

But Yang Ming (2609)’s story is completely different. Also during a similar period, it was listed as a disposal stock due to a surge, but shortly after, it was re-listed due to a “large decline over the past 6 days,” and its stock price remained sluggish for a long time.

What does this mean? Disposal stocks are not automatically rising machines; whether you can make money depends on the company itself.

Are Disposal Stocks Worth Investing In? The Key Points

From Fundamental Perspective

Core business, product competitiveness, financial data (revenue growth rate, gross profit margin, net profit)—these are the real factors that determine a stock’s long-term value. Disposal status is just an abnormal trading condition and does not reflect the quality of the company.

If, through in-depth research, you believe a company is still worth investing in, then the disposal status might even be an opportunity. During this restricted trading period, liquidity is poor, short-term speculators tend to avoid it, and genuine investors can accumulate shares at relatively stable prices.

From the Chip/Ownership Perspective

During disposal, since margin trading and financing are unavailable and trading is restricted, the movement of major funds becomes relatively “clean,” making it easier to identify. You can observe after-hours data to see whether institutional funds are buying or selling, which is very helpful for predicting future trends.

When to Buy, When to Avoid?

Consider buying when:

1. The stock is in a sideways consolidation during disposal, indicating market sentiment has stabilized and a rebound is expected after lifting restrictions.
2. The current price is in a reasonable or undervalued range, providing a low-cost entry point.
3. The company’s fundamentals remain solid, and being listed as a disposal stock is just a short-term trading anomaly.

Avoid when:

• The stock begins to fall sharply during disposal—this often indicates short-selling pressure, making selling more difficult.
• The overall market is in a downtrend or macroeconomic conditions are bleak, amplifying the risks of disposal stocks.

Is Disposal Stock Suitable for Long-Term Holding?

It depends on your risk tolerance and investment goals:

Risk Warning: Disposal stocks tend to carry higher risks. If a company has poor management, financial issues, or major negative events, holding long-term could lead to significant losses.

For Long-Term Investors: If you are a long-term investor who can tolerate large fluctuations and has confidence in the company’s future, the disposal status itself isn’t that important. The trading restrictions have limited impact on long-term holdings, and regulators often require disposal stocks to disclose financial reports regularly, allowing you to stay updated on the company’s operations.

Not Suitable for Short-Term Traders: If you are a short-term trader or have low risk tolerance, avoiding disposal stocks is safer. After all, only being able to trade once every 5 or 20 minutes can be a big obstacle for quick trades.

Final Advice

Disposal stocks are essentially a “yellow card warning” in the stock market, but a yellow card doesn’t mean a death sentence. The true determinant of a stock’s investment value remains the company’s operational quality.

Instead of fixating on the label of disposal, ask yourself: Is this company worth holding? Is the current price reasonable? If the answers are yes, then the disposal status might actually be a low-price entry opportunity.