A Complete Guide to Investing Full Amounts Before Settlement: Risks, Trading Process, and Broker Selection

How risky is investing in full-delivery stocks? Understand these first

Before purchasing full-delivery stocks, you need to know why these stocks are classified as full-delivery. Simply put, full-delivery stocks refer to a settlement system in stock trading where the buyer must pay the entire purchase amount. In the Taiwan stock market, this is a special trading method. When a listed company’s net asset value per share falls below 5 NT dollars due to operational difficulties, financial crises, or major violations, or when other significant risks are triggered, it will be classified as a full-delivery stock.

The risks associated with these stocks mainly manifest in several aspects:

High-risk investment target. Stocks with a net asset value below 5 NT dollars usually reflect serious issues in management, finance, or legal aspects of the company, which cannot be resolved through short-term fluctuations.

Highly volatile. When the stock price hovers around the 5 NT dollar threshold, it is particularly prone to large swings, because of the transition in trading systems. When stocks switch from margin trading to full-delivery, they often hit limit-down consecutively.

No dividends or rights issues. Full-delivery stocks do not distribute dividends nor offer rights issues; holders can only gamble on the company’s revival.

Extremely poor liquidity. These stocks trade only once every 30 minutes, with very few buyers and sellers. Exiting quickly is very difficult, and transaction costs rise sharply.

Is there a chance for full-delivery stocks to turn around? What are the conditions for removal?

Good news is, being classified as a full-delivery stock is not permanent. When the company’s operational situation improves, there is indeed a chance to revert to regular stock trading. But to be removed from full-delivery status, these conditions must be met:

For listed companies: The net asset value per share must exceed 5 NT dollars for two consecutive quarters, and shareholder equity must remain above 300 million NT dollars for two consecutive quarters.

For OTC (over-the-counter) companies: Only one quarter with a net asset value per share exceeding 5 NT dollars and an increase in shareholder equity is needed.

The entire removal process is handled by the Taiwan Stock Exchange. Usually, after collecting all quarterly reports, a review is conducted on the first working day. Once the review announcement is made, it takes effect in 2 days, and the stock reverts to the regular trading system.

How to check the list of full-delivery stocks? One-minute guide

To find out which stocks are classified as full-delivery stocks, simply visit the official website of the Taiwan Stock Exchange. After entering the site, click sequentially on “Trading Information” → “Trading Changes,” and you will see the latest list of full-delivery stocks and related details.

The trading process for full-delivery stocks is very different; here’s how to operate

Since full-delivery stocks cannot use margin or short-selling credit trading tools, their buying and selling process is completely different from regular stocks:

Buying process

You cannot place orders directly in your account like with regular stocks. You must first transfer the entire purchase amount (including fees) to the broker’s designated settlement account at once, and provide the stock name and quantity to the broker. To avoid order failure due to insufficient funds, it’s common to transfer more than the expected amount. If there is any remaining balance on the same day, the broker generally refunds it to your personal account before 3:30 PM.

Selling process

To sell, you need to first “reserve” the stocks (pre-acceptance). The process involves calling the broker to request the reservation for the day (some brokers support app-based reservations). The broker will record a confirmation, and only after successful confirmation can you instruct the broker to sell. Note that if the stock does not sell by the close of trading that day, you need to reserve again the next day, which is more cumbersome.

Which Taiwanese brokers support trading of full-delivery stocks?

Many brokers in Taiwan support full-delivery stock trading. Some of the more well-known and popular ones include:

Fubon Securities: One of Taiwan’s largest brokers, offering a comprehensive online trading platform and rich investment tools, supporting full-delivery stocks.

Yuanta Securities: With the most branches, supporting mobile orders, cloud synchronization, and fully supporting full-delivery stock services.

CITIC Securities: Experienced in financial markets, providing professional investment advisory services, also supporting full-delivery stocks.

KGI Securities: An established Taiwanese broker, with user-friendly account management features, supporting full-delivery stock trading.

Key reminders for investing in full-delivery stocks

Based on the above analysis, here are some crucial points to remember when investing in full-delivery stocks:

Being classified as a full-delivery stock indicates the company is facing substantial difficulties. Liquidity is severely limited, leading to minimal market circulation, and stock prices often plummet. The risks are much higher than those of regular stocks. Before buying, thoroughly assess your risk tolerance and avoid blindly following the trend.

If you are interested in full-delivery stocks, it is recommended to first familiarize yourself with the inquiry methods, understand the removal conditions, choose reputable brokers, and carefully evaluate the company’s fundamentals and risk-reward ratio. After all, while these stocks may have a turnaround opportunity, the journey is often long and full of uncertainties.