Must-read before full settlement of risky stocks: A guide to the "Risk Zone" in Taiwan's stock market

The Truth About Full Settlement Stocks: Why Are Your Stocks Being Put in the “Small Black Room”?

In the Taiwan stock market, there is a special category of stocks that investors avoid at all costs, known as full settlement stocks. Simply put, full settlement stocks refer to stocks of listed companies that, due to poor management, deteriorating finances, or violations, have a net asset value per share falling below the face value of 5 NT dollars, or have been forcibly regulated by the exchange due to major violations. Unlike ordinary stocks, these stocks require buyers to pay the full purchase amount upfront at the time of trading and cannot use credit trading tools such as margin or short selling.

What does it mean once a stock is classified as a full settlement stock? It indicates that the company is in trouble, with financial indicators flashing red, or involved in legal risks. However, this is not an absolute “death sentence”—as long as the company recovers and meets certain conditions, there is a chance to escape.

Can Full Settlement Stocks Turn Around? The Conditions for Escape Are Here

Being labeled as a full settlement stock is indeed painful, but it is not irreversible. When a company revives and its financial indicators improve, it can apply to restore its ordinary stock status and re-enter normal trading mechanisms. Specifically, the requirements are:

For listed companies:

• Consecutive two quarters with net asset value per share above 5 NT dollars, and
• Shareholders’ equity exceeding 300 million NT dollars for two consecutive quarters

For OTC (Over-the-Counter) companies:

• A single quarter with net asset value per share exceeding 5 NT dollars, and
• Shareholders’ equity showing growth compared to the previous quarter

This conversion process is usually conducted as a formal review on the first working day after the quarterly reports are compiled by the Taiwan Stock Exchange, and it takes effect on the second working day after the announcement. In other words, as long as the fundamentals turn around, the door to escape remains open.

How to Check the List of Full Settlement Stocks? Quickly Master the Market Blacklist

Want to know which stocks have become full settlement stocks? The Taiwan Stock Exchange official website provides real-time inquiries. The steps are: go to the official website → select “Trading Information” → click on “Change Trading,” and you can view the complete list of full settlement stocks and the latest updates. Regularly checking this list can help investors avoid risks in a timely manner.

Special Rules for Buying and Selling Full Settlement Stocks

The process of trading full settlement stocks is entirely different from that of ordinary stocks, mainly because margin trading is not allowed. Investors need to pay special attention to the following points:

Correct way to buy: Full settlement stocks cannot be ordered online via self-service. Instead, you must: first transfer all the funds you plan to invest (including fees) to the designated settlement account of your broker, then provide the stock code, quantity, and other information to your broker. To avoid order failures due to insufficient funds, investors usually transfer a slightly higher amount as a buffer. If there are unused funds or balances on the same day, brokers generally return them to your personal account before 3:30 PM.

Key points for selling: Selling full settlement stocks requires prior communication with your broker to reserve the stocks (industry term: “circle storage”). Investors must call their broker to request this reservation, which will be recorded via call recording (some brokers also offer app-based reservation). Only after confirming the reservation can you place a sell order during trading hours. If the order is not executed on the same day, you need to reapply for reservation the next day, which is more cumbersome.

The Four Major Investment Traps of Full Settlement Stocks

The main reason investors stay away from full settlement stocks is due to the high level of risk they carry compared to ordinary stocks:

High risk level itself — Stocks falling into the full settlement category often reflect serious management crises, financial difficulties, or legal risks, which are signals of danger.

Highly volatile and unpredictable — When stocks hover around the net asset value of 5 NT dollars, every piece of news can trigger sharp fluctuations. Especially when a stock is downgraded from margin trading to full settlement, it often experiences consecutive limit-downs, catching investors off guard.

No cash returns — Full settlement stocks do not pay dividends or offer rights issues. The only hope for shareholders is for the company to revive and re-enter the ordinary stock category; otherwise, they are left waiting passively.

Severely limited liquidity — Full settlement stocks are only traded once every 30 minutes during the call auction, which inherently limits liquidity. Coupled with scarce buyers and sellers, it often results in situations where you want to sell but no one is willing to buy, or vice versa, directly increasing transaction costs and risks.

Full settlement stocks are an important risk management tool in Taiwan’s stock market, but for investors, they serve more as warning lights. Before deciding to get involved, be sure to do thorough research and assess your own risk tolerance carefully.