Has your stock suddenly been "locked"? Understand how long it takes to解除 (release) and its investment mechanism

Why Did Your Stocks Suddenly Become Difficult to Trade?

When the stock market experiences intense volatility, some investors may notice strange phenomena with their holdings: prices doubling in just a few weeks, yet when trying to sell, the transaction speed becomes unusually slow, and margin trading channels are also closed. This is not a system malfunction but indicates that your stocks have been included in the Taiwan Stock Exchange’s special monitoring list.

This phenomenon reflects overheated trading in the market. When stocks exhibit abnormal short-term price swings, excessively high turnover rates, or unusual surges in trading volume, regulators will take action to cool down the market. All these trading restrictions point to a term: Disposal Stocks.

Understanding the Classification System of Disposal Stocks

Before delving into how long disposal stocks are restricted, it’s essential to understand the entire process from normal trading to restrictions. Taiwan’s abnormal trading warning system for stocks is divided into three levels:

Level 1: Watch Stocks are the initial warning signals. When a stock’s price increases by more than 100% within 30 trading days, or its single-day turnover rate exceeds 10%, or recent trading volume shows abnormal expansion, the exchange marks it as a watch stock. Importantly, stocks listed as watch stocks are not restricted at all in trading; investors can buy and sell freely as with regular stocks.

Level 2: Warning Stocks appear when the abnormal trading conditions of watch stocks continue to worsen. This is a transitional stage and also triggers the activation of disposal mechanisms.

Level 3: Disposal Stocks are the most stringent level of control, resulting from continuous 3 to 5 trading days meeting the watch stock criteria or meeting warning stock standards. Once in this stage, investors will face significant trading restrictions.

How Do Trading Restrictions on Disposal Stocks Work?

Restrictions on disposal stocks are implemented in two stages, with increasing severity.

In the first stage of disposal, the matching method shifts from continuous trading to matching every 5 minutes. More importantly, when a single buy or sell order exceeds 10 lots or accumulates to 30 lots, investors must perform a “collateralized transaction”—the system will directly freeze the full amount of funds in the investor’s account to ensure the transaction completes, no longer enjoying the traditional T+2 payment extension. Margin trading and short selling functions are completely suspended.

If the abnormal performance persists and the stock again meets disposal criteria within 30 days, it enters the second stage of disposal. At this point, matching occurs every 20 minutes, and regardless of the trade size, all transactions are forcibly conducted via collateralized trading. As a result, trading volume usually shrinks significantly.

How Long Do Disposal Stocks Remain Restricted? Details on Time Calculation

The most common question from investors—How long do disposal stocks stay restricted?—is generally about 10 trading days. However, this period can vary.

If during the disposal period, the stock’s intraday offset volume accounts for more than 60% of the total daily trading volume, the disposal period will automatically extend to 12 trading days. This mechanism aims to further curb excessive speculative day trading.

Once the disposal period ends, the stock will automatically be removed from the disposal list and return to normal trading. However, it’s important to note that entering the second stage of disposal often indicates serious market irregularities, and the stock’s performance after lifting restrictions may tend to deteriorate further.

Are Disposal Stocks Truly Unbuyable? Case Studies Provide the Answer

Disposal stocks are not necessarily off-limits for participation; the key lies in the company’s fundamentals. Historical cases offer interesting contrasts.

Vanguard Electronics (6756) was classified as a disposal stock in June 2021 and even entered the second stage of disposal, yet during the entire disposal period, its stock price actually increased by 24%. This indicates that market optimism about the company’s prospects did not change despite trading restrictions.

In contrast, Yang Ming (2609) experienced a very different situation. Although it was classified as a disposal stock due to large gains and high turnover at the same time, by the end of July, it was reclassified due to “significant decline over the past 6 days,” and subsequently, its stock price remained sluggish for a long time. The stark difference highlights that: Disposal stocks are not a death sentence for investment; the company’s operational strength is the decisive factor.

How to Assess the Investment Value of Disposal Stocks?

To determine whether a disposal stock is worth investing in, consider two dimensions:

Fundamental Analysis requires in-depth understanding of the company’s core business, market position, and key financial indicators such as revenue growth rate, gross profit margin, and net profit. Tracking the trend of these indicators helps evaluate whether the company maintains stable operations.

Market Position Analysis focuses on capital flow. During disposal periods, since financing and short selling are restricted and trading is limited, signals of major funds’ buying or selling become more transparent. Investors can better see whether large capital is accumulating or fleeing. This “clarity” can sometimes be an advantage.

Before investing, investors should check if the stock price during the disposal period is in a sideways consolidation. If the stock begins to decline sharply, even if fundamentals seem good, it’s wise to temporarily avoid. Also, assess whether the current stock price is relatively reasonable; if it is truly undervalued, small-scale entry during liquidity restrictions can be considered, waiting for future upward opportunities.

Are Disposal Stocks Suitable for Long-term Holding?

For long-term investors, whether disposal stocks are suitable depends on three factors:

Company Fundamentals: Disposal stocks often reflect abnormal trading behavior, which may indicate potential issues. Long-term holding requires confirming that the company’s operational fundamentals remain solid.

Market Cycle: If the overall stock market is in a downward phase or macroeconomic conditions are sluggish, the risks associated with disposal stocks are amplified. Conversely, in a bullish market with supportive economic conditions, holding disposal stocks might offer better opportunities.

Personal Risk Tolerance: If investors can tolerate large stock price fluctuations, holding fundamentally stable disposal stocks for the long term may be appropriate. However, for conservative investors, entering disposal stocks might not be the best choice.

It’s worth noting that short-term traders are more affected by the inability to perform day trades, but long-term investors are not hindered by the extended matching times. In fact, regulators often require disposal stocks to disclose updated financial reports periodically, which can help investors better understand the company’s operational status.

Key Reminders

Disposal stocks are merely a temporary abnormal trading state and are not necessarily related to the quality of the company. Whether a stock can be removed from the disposal list or continue to rise afterward ultimately depends on the company’s growth and profitability. Conducting thorough research and avoiding market sentiment blindly is the proper way to interact with disposal stocks.