How to buy disposed stocks? A comprehensive guide to trading restrictions and investment opportunities

The Practical Challenges of Trading Suspended Stocks

Investors in the stock market encounter a special category of stocks: those with extreme short-term price swings, sometimes exceeding 100% in a single month, yet unable to be quickly traded like regular stocks. At the same time, margin trading and short selling functions are restricted. These stocks are classified by the Taiwan Stock Exchange as “Suspended Stocks” for observation.

How to buy suspended stocks? The answer is: you can buy them, but under strict restrictions.

Why Do Suspended Stocks Occur?

When a stock exhibits abnormal trading phenomena over a short period—such as excessive price fluctuations, extremely high turnover rates, or abnormal trading volume—the exchange will first flag it as a watch stock and issue a warning. If abnormal trading continues, it will be further upgraded to a warning stock, and eventually included in the suspended stock list.

The core purpose of suspending stocks is to cool down overheated trading. By increasing trading difficulty, investors are encouraged to assess more calmly, reducing speculative behavior.

How to Buy Suspended Stocks: A Fundamental Shift in Trading Methods

Stocks listed as suspended go through two stages, with each stage imposing increasingly strict trading restrictions.

First Suspension Stage:

• Matching time changes from anytime to once every 5 minutes
• For single transactions exceeding 10 lots or cumulative over 30 lots, a circle deposit transaction is required
• Margin trading and short selling are not allowed
• Payment method shifts from T+2 to full circle deposit

Circle deposit trading means the system will freeze the investor’s bank funds in real-time, allowing the transaction only after confirming sufficient funds. Regular stocks still enjoy the convenience of T+2 payment.

Second Suspension Stage:

• Matching time extends to once every 20 minutes
• All trades are conducted via circle deposit, regardless of volume
• Trading volume often drops sharply, severely impairing liquidity

These measures lead to suspended stocks being colloquially called “prison” or “locked up” by investors.

Market Status of Suspended Stocks: Data Insights

In December 2023, the Taiwan Stock Exchange listed 10 stocks—including Evergrande, Lishan, Hongguang, Huangchang, Rongchuang, Yingguang, Pola-KY, Medtech-DR—on the suspended stock list. This indicates that suspended stocks are not an uncommon phenomenon in the market.

The typical suspension period is 10 trading days, but if the intraday offset trading volume exceeds 60% of total trading volume, the suspension is extended to 12 trading days. After the period ends, the stock is removed from suspension.

How to Make Suspended Stocks Valuable?

Step 1: Assess the Company’s Fundamentals

Suspended stocks are merely temporary abnormal trading states and do not reflect the company’s quality. Investors should thoroughly analyze core business operations, product competitiveness, and financial health. Focus on indicators like revenue growth rate, gross profit margin, and net profit to evaluate whether the company’s profitability is stable.

For example, Wavetech Electronics (6756) entered suspension in June 2021 and saw its stock price increase by 24% during that period, whereas Yangming (2609), also suspended, performed poorly. The key difference lies in the robustness of their fundamentals.

Step 2: Observe Capital Flow Trends

Without margin trading, the buying and selling actions of major funds in suspended stocks are relatively transparent. Investors can monitor closing data to observe the inflow and outflow of major funds, consecutive buying or selling days, etc., to decide whether to follow. Due to trading restrictions increasing short-term operation costs, institutional long-term positioning intentions become more apparent.

Step 3: Confirm Valuation Range

Before investing, verify whether the stock price is in a sideways consolidation phase. If the price drops sharply during suspension, it’s best to avoid. However, if the stock is relatively undervalued and fundamentals remain sound, the suspension period might present a low-cost buying opportunity.

Differences Between Suspended Stocks, Watch Stocks, and Warning Stocks

The upgrade path from normal to abnormal stocks is: Normal Stock → Watch Stock → Warning Stock → Suspended Stock.

Watch Stocks are merely warnings; trading is unrestricted, and margin trading/short selling are still allowed. Warning Stocks continue abnormal trading and are starting to be included in suspension. Suspended Stocks are subject to multiple trading restrictions.

Among these, suspended stocks have the highest trading costs and the poorest liquidity.

Are Suspended Stocks Suitable for Long-term Holding?

Holding suspended stocks long-term requires comprehensive consideration:

Risk Factors: Abnormal trading behavior may hide operational issues, financial risks, or major negative events. The risks associated with suspended stocks are generally higher than those of normal stocks.

Market Environment: During bullish markets and favorable economic conditions, holding suspended stocks may have more opportunities; during downturns, risks increase significantly.

Investor Profile: Short-term traders are more affected by extended matching times and cannot perform intraday trading; long-term investors are less affected and can better keep up with corporate financial updates.

When to Consider Entry: If investors are confident in the company’s future prospects, have strong risk tolerance, and the stock is reasonably undervalued, holding fundamentally stable suspended stocks long-term might be an opportunity. Conversely, if risk appetite is limited, it’s better to avoid suspended stocks.

Final Reminder on How to Buy Suspended Stocks

Before purchasing suspended stocks, be sure to confirm three points: first, whether the company’s fundamentals are truly solid; second, whether the stock price is reasonably valued; third, whether your personal risk tolerance can handle high volatility. Only when these conditions are met can you find genuine investment opportunities within the restrictions of suspended stocks. The trading inconvenience is superficial; the real determinant remains the company’s long-term value.