How to buy disposed stocks? Complete analysis of trading restrictions, risks, and investment opportunities

Have you ever encountered this situation? A stock surges over 100% in just a few weeks, seeming full of opportunity, but when you try to place an order, you find the transaction speed is as slow as a turtle, and margin trading is not available. This is very likely because the stock has already been included in the Disposal Stock list. So, how do you buy disposal stocks? What restrictions are behind this? Are there still investment opportunities?

Why are stocks listed as disposal stocks? What are the trading restrictions?

When a stock exhibits abnormal trading phenomena in a short period—such as a rise of over 100% in 30 trading days, a daily turnover rate exceeding 10%, or abnormal trading volume—the Taiwan Stock Exchange will list it as a Disposal Stock. The purpose of this mechanism is simple: to curb excessive trading by increasing trading difficulty, giving investors some cooling-off time.

Once a stock enters the disposal stage, you will encounter obvious trading obstacles:

First Disposal Stage: Trades are matched every 5 minutes (normal stocks trade anytime), and any single order exceeding 10 lots or a cumulative total over 30 lots requires a reserved transaction (full prepayment), with margin trading and short selling suspended. Simply put, you must ensure your account has sufficient cash to complete the transaction; you cannot enjoy the convenience of T+2 deferred payment.

Second Disposal Stage: If volatility remains unmitigated, the stock will enter a more stringent second disposal—matching every 20 minutes, with all trades conducted via reserved transactions regardless of buy or sell volume. At this point, trading volume usually drops sharply, and liquidity deteriorates significantly.

The disposal period typically lasts for 10 trading days, but if the intraday offset ratio exceeds 60%, it will be extended to 12 trading days. During this period, margin trading and short selling are not allowed, making it especially difficult for short-term traders.

Things to know before buying disposal stocks

Whether disposal stocks are worth buying depends on the specific situation. Taking WeiFeng Electronics (6756) as an example, it was included in the disposal list in June 2021 and even entered the second disposal stage, yet its stock price increased by 24% during this period. In contrast, Yang Ming (2609) was also listed as a disposal stock due to excessive gains, but later was re-listed after a significant decline, and its stock performance remained sluggish for a long time.

Key points to observe:

Trading volume will significantly shrink, indicating deteriorating liquidity. If you need to exit quickly, you may face difficulty executing trades promptly. When the overall market is bullish, it is generally not recommended to invest in restricted disposal stocks, as better opportunities are elsewhere.

However, some refer to this phenomenon as “the bigger the restriction, the bigger the tail”—some hot stocks, after being restricted from trading, have relatively stable chips, and once unlocked, may surge again. But this double-edged sword also means that if short-selling forces take advantage to suppress the stock, you may find it impossible to sell.

To evaluate the investment value of disposal stocks, you should return to fundamental analysis:

Examine the company’s core business, financial statements, revenue growth rate, gross profit margin, and net profit trend to determine whether the company truly has competitiveness. Also, observe the chip side—main capital inflows and outflows. Since disposal stocks cannot be margin traded, the trading restrictions increase difficulty, but the buy/sell signals of institutional funds become relatively clearer, making it easier to understand the intentions of institutional investors.

Before buying, be sure to confirm: Is the stock price consolidating sideways during the disposal period, or is it starting to weaken? If there is a sharp decline, it’s best to avoid. Also, assess whether the current stock price is undervalued; if you believe it has value, entering during the disposal period when liquidity is low and chips are stable might be a better timing.

Are disposal stocks suitable for long-term holding?

It depends on your confidence in the company and your risk tolerance.

The risks of disposal stocks are indeed higher than those of normal stocks—abnormal trading may hide operational problems or significant adverse factors. If the overall environment is poor, the stock market is in a down cycle, or the economy is sluggish, disposal stocks face greater risks. However, if the market is bullish and the economic environment is friendly, high-quality companies included in the disposal list may present low-priced entry opportunities.

For short-term traders, the extended matching times and inability to day trade have a significant impact. But for long-term investors, these trading restrictions are less impactful; in fact, they can help by providing more timely insights into the company’s situation through regulatory-mandated financial disclosures.

The ultimate criterion is: If, after thorough research, you are confident in the company’s fundamentals and good prospects, being listed as a disposal stock for a short period should not alter the long-term investment value. Investment decisions should be based on company quality and growth potential, not on trading restrictions themselves.