What does stock disposal mean? Mastering this knowledge helps you avoid trading risks.

Have you ever seen a stock surge over 100% in a short period but found that trading isn’t as smooth as with regular stocks, and even margin trading and short selling functions are frozen? This is most likely because the stock has entered a special regulatory list—Disposal Stocks. So, what does stock disposal mean? How does it affect your investment decisions? This article will provide an in-depth analysis.

Understanding the Core Concept of Stock Disposal

What does stock disposal mean? Simply put, when a stock exhibits abnormal trading behavior in a short period, the Taiwan Stock Exchange will list it on a special regulatory list. These abnormal behaviors include excessive price fluctuations, high turnover rates, and significantly increased trading volume.

The purpose of these regulatory measures is clear—by increasing trading difficulty, to cool down an overheated market and give investors more opportunities to think calmly.

Generally, stocks do not enter strict regulation directly but do so gradually. First, they are marked as “Attention Stocks” for alerts, with trading methods not restricted; if abnormal behavior persists, they are upgraded to “Warning Stocks”; finally, they enter the “Disposal Stocks” list, at which point trading is truly constrained.

Specific Restrictions During the Stock Disposal Phase

Once a stock enters the disposal list, it will go through different stages based on risk levels, with each stage having different trading rules.

First Disposal: Mild Regulation

When a stock is first listed as a disposal stock, the trading system changes from “anytime execution” to “matching every 5 minutes.” This means you cannot execute trades immediately and must wait for the matching window to open.

Additionally, when a single buy or sell order exceeds 10 lots, or multiple orders accumulate to 30 lots, the system will require “circle deposit trading”—meaning investors must pre-deposit sufficient funds in their accounts before the trade can be executed. In contrast, normal stocks use T+2 payment, giving investors a two-day preparation period. Margin trading and short selling functions will also be suspended.

Second Disposal: Strict Control

If the stock remains abnormal during the disposal period and triggers the abnormal standard again within 30 days, it will be upgraded to the second disposal stage. At this point, trading frequency drops to “matching every 20 minutes,” and regardless of the buy or sell volume, all trades will use circle deposit trading. Such measures often lead to a sharp decline in trading volume, making the stock extremely illiquid.

The disposal period usually lasts for 10 trading days, but if the intraday offset volume accounts for more than 60% of total trading volume, it will be extended to 12 trading days. After the period ends, the stock can be removed from the regulatory list.

Normal Stocks vs Disposal Stocks: Trading Method Comparison

Advanced Relationships of Three Types of Abnormal Stocks

The regulatory levels of stocks are not fixed but have a promotion mechanism:

Attention Stocks are the initial alert. When a stock’s price increases over 100% within 30 trading days, or its daily turnover rate exceeds 10%, or its trading volume has abnormal amplification over the past 6 days, it will be classified as an Attention Stock. At this stage, trading is completely unrestricted.

Warning Stocks appear when abnormal trading behaviors of Attention Stocks continue to worsen. If the stock remains abnormal consecutively, regulators will issue warnings and initiate disposal procedures.

Disposal Stocks are the strictest level. When a stock meets the Attention Stock criteria for 3 to 5 consecutive trading days or directly meets Warning Stock conditions, it will be listed on this list and face the various trading restrictions mentioned earlier.

Will Disposal Stocks Rise After Disposal?

This is a concern for many investors, and the answer varies:

For example, WeiFeng Electronics (6756) was listed as a disposal stock in June 2021 and even entered a more stringent second disposal phase. But during this “closure period,” the stock price accumulated a 24% increase. This case supports the popular market saying—disposal stocks “get bigger after being restricted,” meaning that after strict regulation, they may experience larger gains.

However, not all disposal stocks can rebound strongly. Yang Ming (2609) was also listed as a disposal stock during the same period. Initially, the stock price showed some performance, but by the end of July, it was re-listed due to “over 6-day decline,” and afterward, its performance remained sluggish, causing significant losses for investors.

These two cases illustrate that: Stock disposal is merely a change in trading status, not an indication of the company’s fundamental quality. The key lies in whether the company’s fundamentals are solid.

How to Assess Whether Disposal Stocks Are Worth Investing In

When you see a stock listed as a disposal stock, you shouldn’t blindly follow or avoid it. Instead, conduct systematic analysis.

Fundamental Analysis

First, deeply understand the company’s core business, main products, and market position. Next, carefully examine financial statements, focusing on revenue growth rate, gross profit margin, net profit, and other indicators. Then, observe whether financial trends are stable and confirm the company’s sustained profitability.

If the company’s fundamentals are solid and it is only temporarily listed as a disposal stock due to short-term trading heat, the rebound opportunity is relatively higher.

Chipholder Analysis

Focus on capital inflows and outflows. Since margin trading and short selling are suspended during disposal, trading becomes relatively straightforward, making the movement of major funds clearer. Investors can observe institutional buying and selling strength through closing data to decide whether to follow the trend.

Price Position Judgment

Before buying, confirm whether the stock is in a sideways consolidation during the disposal period. If it has already started to decline sharply, it’s better to avoid it temporarily. Conversely, if the stock is relatively undervalued, using the low liquidity period during disposal to enter and waiting for a rebound after regulation is lifted can be a more rational strategy.

Is Disposal Stock Suitable for Long-term Holding?

Whether disposal stocks are suitable for long-term investment requires considering multiple factors:

Fundamentals are the primary factor. Disposal stocks often imply abnormal trading, which may reflect underlying issues. If the company’s operations are good and financials are healthy, temporary abnormal trading is unlikely to change the long-term investment logic. But if the company faces operational difficulties, long-term holding carries high risks.

Market environment is also critical. If the stock market is in an upward cycle and the economy is favorable, disposal stocks may perform well after regulation is lifted. Conversely, in a declining market, risks are amplified.

Investor risk tolerance must match. Disposal stocks tend to be more volatile than normal stocks. If your risk tolerance is low, disposal stocks may not be suitable. But for investors who can withstand large fluctuations and believe in the company’s prospects, holding fundamentally sound disposal stocks long-term still offers opportunities.

Short-term vs long-term investors face different impacts. Short-term traders are more affected because they cannot perform day trading, which can be problematic. Long-term investors, with lower trading frequency, are less affected by longer matching times. In fact, during low liquidity periods, they can better observe major fund movements and seize better entry opportunities.

Summary

What does stock disposal mean? In short, it is a temporary regulatory measure by authorities against abnormal trading behaviors. Being listed as a disposal stock does not mean the company has fundamental problems, nor does it necessarily mean the stock will decline—much depends on the company’s quality.

If you are optimistic about the fundamentals of a disposal stock and, after thorough research, believe it has investment value, you can consider entering when the stock is reasonably valued and patiently wait for the regulation to be lifted. Conversely, if you lack confidence in the company’s prospects, even if it is not under regulation, it may not be worth buying.

Always remember: the label of disposal stock is just a change in trading status; investment value judgment should still return to the company’s fundamentals.