Recently, I’ve noticed a phenomenon: many investors are discussing a certain type of stock. In the short term, it can surge by an astonishing amount, but once people try to place trades, they run into all kinds of restrictions. This situation usually means the stock has been added to the list of disposal stocks.

Actually, disposal stocks aren’t anything new. Taiwan’s stock exchange has had this system in place for a long time. Simply put, when a stock shows abnormal trading conditions within a short period—for example, price move limits that are too large, a sharp spike in turnover rate, or a sudden surge in trading volume—it will be listed as a “special attention” stock. If the situation keeps worsening, it will ultimately move into the disposal stock stage.

So what happens after a stock enters the disposal stage? Trading restrictions kick in. During the first disposal, the stock can only be matched once every 5 minutes. If any single order exceeds 10 lots, or if cumulative orders exceed 30 lots, trading must use a locked-funds settlement (full prepayment). Margin trading and securities lending are also disabled. If things still haven’t improved and the stock moves into the second disposal stage, it gets even stricter: matching is only allowed once every 20 minutes, and all trades must be conducted using locked-funds settlement. The purpose of these measures is to make trading difficult and cool down the market.

That’s why many people jokingly say that being added to the disposal list is like “serving time” or “being put under house arrest.” Usually, the stock has to stay on the list for 10 business days. During this period, liquidity deteriorates significantly, and trading volume often collapses. I’ve seen cases such as Waffer Electronics: after it entered the disposal list in 2021, it still rose 24%. But Yang Ming is different—instead, its stock price weakened during the disposal period.

At bottom, disposal stocks are just a temporary abnormal trading condition and don’t directly reflect the company’s quality. If, through solid research, you believe the company is valuable, the disposal stage can actually be an opportunity—because with poor liquidity and difficulty buying and selling, the movement of main funds tends to be relatively cleaner, making it easier to see what institutions are doing.

To judge whether a disposal stock is worth buying, the logic is the same as assessing a normal stock. First, look at fundamentals: whether the company’s business, financial indicators, and profitability are stable. Then, look at the order flow: whether the main funds are buying or selling. What’s especially important is to confirm, before buying, whether the stock price is consolidating sideways during the disposal period. If it starts to fall sharply, you should avoid it. At the same time, confirm whether the stock valuation is reasonable. If it’s undervalued, waiting until the restrictions are lifted could present a good opportunity for upside.

As for holding disposal stocks long-term, it depends on your own risk tolerance. Problems may be hidden behind the abnormal trading, and the risks are indeed higher than with normal stocks. But if you have confidence in the company, can accept volatility, and the market environment is favorable, long-term holding is not impossible. Short-term investors are affected the most (unable to do intraday round trips), but for long-term investors, the impact of longer matching times is less significant. In fact, they may even be able to understand the company’s situation more promptly through mandatory disclosures.

In general, the essence of disposal stocks still comes down to the company itself; temporary trading restrictions can’t change the company’s fundamentals.