Taiwan's Innovative Stock Investment Guide: Sector Characteristics, Targets, and Strategy Analysis

Core Differences Between the Innovation Board and the Strategic New Board

Taiwan launched the Innovation Board and the Strategic New Board in July 2021 to support innovative companies with core technologies. Although their positioning is similar, their listing locations and thresholds differ.

The Innovation Board is located at the Taiwan Stock Exchange, targeting companies with key technologies (IoT, AI, Big Data, etc.) and a market capitalization of over NT$1 billion. The Strategic New Board operates in the OTC market, mainly serving innovative small and medium-sized enterprises, with more relaxed market cap requirements. As companies grow, Strategic New Board firms have the opportunity to upgrade to the Innovation Board at the Taiwan Stock Exchange.

Current Status and Market Liquidity of Innovation Board Stocks

As of now, four companies are listed on the Innovation Board: NAI Chuang Technology-KY (6854), Cloud Leopard Energy (6869), Hongde Energy (6873), and Yitian Cool Go (2432). The Strategic New Board originally had 21 companies, but 18 have transitioned to the general OTC market, leaving only Pinyuan (6963), Universal Stem Cells (7607), and Yijun Environmental Science (6912).

Notably, the most traded stock on the Innovation Board is NAI Chuang Technology-KY. After a prolonged period of volatility, it rebounded in June this year and recovered from its decline. In emerging markets with scarce liquidity, trading volume becomes an important indicator for stock selection.

Entry Requirements for Investing in Innovation Board Stocks

Investing in the Innovation Board and the Strategic New Board requires “Qualified Investors,” and not all retail investors can participate:

Natural persons must meet one of the following:

• Have at least 2 years of securities trading experience
• Proof of financial assets exceeding NT$5 million
• Average annual income of NT$1.5 million over the past 2 years

Legal entity investors must meet:

• At least 2 years of securities trading experience
• Qualify as a professional institutional investor or have an entrepreneurial investment business status

Once qualifying as a Qualified Investor, they can directly apply to their broker for trading rights. Subsequent trading procedures are the same as for regular stocks.

Trading System and Risk Restrictions

Due to the higher risks associated with Innovation Board stocks, the trading system has specific restrictions:

Please note that Innovation Board stocks are not allowed for margin trading or day trading, which imposes significant restrictions on short-term investors.

Opportunities and Risks of Investing in Innovation Board Stocks

Investment Advantages: The Innovation Board and Strategic New Board open financing channels for innovative companies that previously faced listing barriers. Investors can participate in early-stage startups, growth companies, and high-tech sectors, diversifying their asset allocation. These companies are supported by government policies, offering relatively bright prospects.

Investment Risks: Innovative companies are inherently high-risk investments with higher failure rates, requiring investors to have strong risk assessment capabilities. Additionally, due to limited participants and trading varieties, market volatility can be large, liquidity may be poor, and liquidity traps may occur. Investors should adopt a long-term holding mindset and maintain good risk management awareness.

Investment Strategies for Innovation Board Stocks

Based on the performance analysis of Innovation Board stocks, investors can adopt two main strategies:

Strategy 1: IPO Subscription and Swing Trading — Innovation Board stocks often experience upward trends after listing, with some stocks achieving positive returns within a week. Investors can take profits early and re-enter when prices fluctuate and fall to low levels.

Strategy 2: Focus on Stocks with Sufficient Liquidity — Stocks with higher trading volume tend to have more stable market participation and more effective price discovery. Compared to illiquid stocks, these are less risky to operate.

Long-term Outlook for Investing in Innovation Board Stocks

As of April 2023, the number of qualified investors in Taiwan has exceeded 190,000, with more innovative companies planning to join the Innovation Board family. With long-term government support and market development, the ecosystem of the Innovation Board and Strategic New Board will mature.

Although the investment threshold is high, for qualified investors, participating in the growth of innovative companies is a wise way to seize future trends. Innovative companies represent the future development direction of Taiwan’s financial market. Whether directly investing in Innovation Board stocks or participating through other means, they should be included in investment strategies.