Recently, I’ve been looking at some stocks with abnormal price increases, and I found an interesting phenomenon: some stocks surge by more than 100% within a short period, but buying and selling become extremely difficult, and margin trading and securities lending are also restricted. Later, I realized that these stocks have already been classified as disposal (restricted) stocks.

When it comes to whether disposal stocks can rise, it’s a question many investors ask. In fact, disposal stocks are themselves a regulatory measure used by the Taiwan Stock Exchange to manage stocks with abnormal trading. When a stock’s short-term trading price fluctuation range is too large, its turnover rate is too high, or its trading volume is abnormally inflated, the exchange will first list it as a “stock to watch,” reminding investors. If the situation keeps deteriorating, it will be upgraded to a disposal stock.

What happens after a stock enters the disposal category? The trading method changes directly. During the first disposal, the stock can only be matched every 5 minutes. If buy or sell orders exceed a certain amount, they must undergo ring-fencing/escrow trading (with full payment in advance). Margin trading and securities lending are completely suspended. If it still hasn’t improved and the standards are triggered again within 30 days, the stock enters the second disposal: the matching time is extended to 20 minutes, making trading even more difficult. Generally, the disposal period lasts 10 business days, but if intraday trading turnover exceeds 60%, it can be extended to 12 days. During this time, investors often jokingly call it “serving time” or “being put under house arrest.”

So, will disposal stocks rise? This depends on the specific situation. I’ve seen two cases with starkly different outcomes. WeiFeng Electronics was listed as a disposal stock in mid-2021. After entering the first disposal, the stock didn’t lose momentum and even entered the second disposal—but throughout the entire process, the stock price still accumulated a 24% gain. By contrast, Yang Ming, which was also listed at the same time due to its large price increase, ended up being listed for a second disposal again at the end of July. However, the reason changed to “the cumulative decline over the past 6 days was too large,” and afterward the stock price remained sluggish.

From a liquidity perspective, after a stock is listed as a disposal stock, trading volume usually shrinks significantly, which has a big impact on people who trade in the short term. But there’s a saying in the market: “the more it’s restricted, the bigger the tail.” It means that some “hot” stocks that surged earlier may have relatively stable holdings (chips) once they enter the disposal period and thus suffer from low liquidity; when the restrictions are lifted, they may rise again. Of course, if a stock is targeted by short-selling forces during the disposal period, selling it can also become difficult.

To judge whether a disposal stock has investment value, the key still lies in the company itself. Disposal stocks are only a temporary abnormal trading status, and they cannot reflect the quality of the company. If, after doing solid research, you believe the company still has value, you can certainly get involved during the disposal period. The analysis method is the same as for normal stocks: from a fundamentals perspective, look at the company’s core business and competitive position, and financial indicators; from the “chip/holdings” perspective, examine capital flow direction. Especially during the disposal period, since margin trading and securities lending are not available, the movement of main funds tends to be relatively cleaner, making it easier to see the true intentions of institutions.

That said, there are a few things to pay attention to. Before buying, confirm whether the stock price is consolidating during the disposal period; if it starts to drop sharply, it’s best to avoid it. At the same time, confirm whether the current valuation is reasonable—if you think it’s undervalued, it can also be a good idea to enter during the disposal period and wait for a potential upswing.

As for long-term holding, this depends on the investor’s risk tolerance and investment objectives. The risk of disposal stocks is usually higher than that of normal stocks, and problems may be hidden behind abnormal trading behavior. But if the broader environment is favorable, the company’s fundamentals are stable, and the investor has strong risk tolerance, long-term holding can also present opportunities. For short-term traders, the restrictions can have a significant impact, but for long-term investors, the limitation that makes matching take longer is not a big issue; instead, it may even allow them to see updates to the company’s financial reports more promptly.

In summary, the question of whether disposal stocks will rise has no absolute answer. Ultimately, you still need to base your judgment on the company’s operating situation and the market environment.