Taiwan's New Version Stock Investment Guide: From Understanding Sectors to Mastering Strategies

The Fundamental Difference Between the Innovation Board and the Strategic New Board

Taiwan officially launched the Innovation Board and the Strategic New Board in July 2021, aiming to provide financing channels for innovative companies that meet specific criteria. While both focus on innovation, their locations and requirements differ.

The Innovation Board is listed on the Taiwan Stock Exchange, and target companies must possess key core technologies and innovative capabilities (such as IoT, artificial intelligence, big data, etc.), with a market value of no less than NT$1 billion. In contrast, the Strategic New Board is located in the OTC market, mainly serving small and medium-sized innovative companies, with more relaxed market value requirements.

It is noteworthy that companies on the Strategic New Board, after completing their business development stage and meeting certain conditions, can apply to transfer to the Innovation Board for listing on the main exchange, forming a progressive growth mechanism.

Current Listing Status of the Innovation Board Stocks

As of now, there are 4 stocks listed on the Innovation Board:

Regarding the Strategic New Board, the existing listed stocks include Pin Yuan (6963), Universal Stem Cells (7607), and Yijun Environmental Science (6912), among which several companies have completed transfer to the OTC General Board.

The Uniqueness of Trading Regulations

The trading rules for stocks on the Innovation Board differ significantly from traditional boards, mainly due to the high-risk nature of the market:

Common Restrictions: No day trading, no margin trading, and no securities lending operations.

Price Fluctuation Limits:

• Innovation Board sets a 10% daily price limit.
• The first 5 trading days on the Strategic New Board have no price limit; afterward, it is 20%.

Trading Hours: Both boards operate from 9:00 AM to 1:30 PM.

Trading Units: Both are 1,000 shares per lot, with after-hours odd-lot trading available, but no intraday odd-lot trading.

These restrictions aim to prevent excessive speculation but also impact market liquidity.

Balancing Investment Opportunities and Practical Challenges

Potential Advantages

Stocks on the Innovation Board initially demonstrated strong performance. According to market data, many stocks achieved positive returns within the first week of listing, with three maintaining an upward trend within one week after going public. From a data perspective, there are indeed initial profit opportunities for investors.

Moreover, government support policies and the trend of developing innovative industries provide institutional benefits for these companies. As of April 2023, the number of qualified investors in Taiwan has exceeded 190,000, with market participation continuously increasing.

Objective Assessment of Risks

After initial gains post-listing, stocks on the Innovation Board generally entered a period of oscillation and decline, reflecting market realities. Investors face multiple challenges:

Market Depth Insufficiency: Limited trading varieties and relatively concentrated participants lead to higher volatility and overall weak stock liquidity. Although Nac Technology-KY has the highest trading volume, its market depth remains limited.

Information Asymmetry: Innovative companies generally lack long-term operational histories, making risk assessment difficult. Startups or growth-stage companies face higher failure risks compared to traditional listed companies.

Investor Suitability: Stocks on the Innovation Board are not suitable for retail investors with limited risk tolerance; they require professional analysis skills and psychological resilience.

Entry Thresholds for the Innovation Board Market

Not everyone can participate in trading stocks on the Innovation Board. Investors must meet the “qualified investor” standards:

Institutional Investors:

• Professional institutional investors or legal entities with over 2 years of securities trading experience.
• Venture capital firms established according to law.

Individual Investors must meet at least one of the following:

• Over 2 years of securities trading experience.
• Provide proof of NT$5 million in financial capacity.
• Have an average annual income of NT$1.5 million over the past 2 years.

This means most retail investors cannot directly participate in Innovation Board stock trading. Qualified investors can apply through their brokerage firms to open trading rights, with the same process as regular stocks.

Feasible Investment Strategies for Innovation Board Stocks

Initial Subscription Strategy Logic

Based on market performance, stocks on the Innovation Board generally rise on the first day and in the first week, then enter a correction phase. Following this pattern, taking profits early after initial gains is a relatively stable strategy. However, this approach requires quick decision-making and market timing skills.

Liquidity Considerations for Holding Stocks

If choosing to hold long-term, focus on individual stock trading volume. For example, Nac Technology-KY, after a prolonged adjustment, began rebounding in June 2024 and has recovered most of its decline. In a market environment with scarce liquidity, stocks with higher trading volume are easier to transact, reducing holding risks.

Investors should prioritize targets with relatively ample trading volume to avoid being trapped by low liquidity.

Comparing with Global Markets

Nasdaq as a Reference

Taiwan’s Innovation Board and the U.S. Nasdaq market share similar concepts, but differ significantly in market maturity. Nasdaq has extremely low investment thresholds and covers many high-quality innovative companies, far exceeding Taiwan’s Innovation Board. Over the past 10 years, the Nasdaq 100 index has nearly quadrupled, with a 35% increase so far in 2023.

Practical Choices for Ordinary Investors

For retail investors who cannot meet the Innovation Board’s qualified investor standards or wish to diversify risk, indirect participation in global innovative companies may be a more practical approach. Tracking investment tools based on the Nasdaq index allows exposure to international innovation industries while maintaining relatively low entry barriers.

The Long-term Significance of Investing in Innovative Industries

Innovative companies represent the future direction of economic development. The Taiwanese government continues to promote relevant policies, and the number of participants in the Innovation Board market increases year by year. Whether directly participating in Innovation Board trading or engaging through other channels, long-term involvement aligns with industry development trends.

However, investors need to recognize that investing in Innovation Board stocks is not suitable for everyone. Its high-risk nature means it should only be part of a portfolio for investors with strong risk tolerance. For most retail investors, a rational assessment of their own conditions and choosing investment methods aligned with their capabilities is the responsible approach.

The growth prospects of innovative companies are indeed promising, but expectations should not be an excuse to ignore risks.