Taiwan shares slump as poll disputed

THE results of weekend ballot-box contests in

While a steep sell-down followed the razor-thin victory for Taiwan's Presidential incumbent amid fears of prolonged instability, a thumping win for Malaysia's ruling coalition stoked a market rally in Kuala Lumpur.

Taiwan's benchmark Weighted index crumbled 455.49 points or 6.7% to 6359.6 as investors reacted with some alarm to what ING described as 'the most investor unfriendly election outcome imaginable'.

The slump wiped an estimated £15bn off the market's capitalisation. It also knocked trading in nearby Hong Kong, where the 33-member Hang Seng index backtracked by 236.09 points to 12,554.49.

Brokers noted that weakness in US markets in the final session of last week made a soft start today for Asia all but inevitable. Taiwan's electoral tension exacerbated the decline.

The cause of the sell-off was three-fold. First victory in Saturday's Presidential contest went to incumbent Chen Shui- bian, who favours greater independence from China. His policies, if implemented, are bound to trigger a rise in tensions. Second, Chen won by a handful of votes amounting to less than 0.3% of the votes cast. Opponent Lien Chan's demand for a recount has been supported by demonstrations.

His supporters allege that the poll was flawed, and have also raised questions about an apparent assassination attempt against Chen last week, in which Chen was slightly injured.

Third, there are signs that emotions are rising in Taiwan as sporadic violence by Lien supporters is reported. The stand-off is likely to last for some time with a trio of judges appointed today to examine the opposition's legal case for a recount.

Among the casualties, chip giant Taiwan Semiconductor Manufacturing dived T$4 or 6.4% to T$59 and EVA Airways slumped T$1.50 or 6.7% to T$21.

The Taiwan government said it was prepared to use State funds to intervene in a bid to stabilise the stock market if there were signs of panic or what it terms 'irrational' selling. Officials today noted that foreign funds were net buyers.

In knock-on selling in Hong Kong. bellwether lender HSBC gave up HK$1.50 or 1.3% to HK$117, affiliate Hang Seng Bank dropped HK$1 or 1% to HK$98.25, and Cathay Pacific Airways was clipped by 35c or Malaysia, by contrast, was a picture of optimism after Prime Minister Abdullah Badawi steered the ruling Barison Nasional coalition to a comfortable win over Islamist opponents in regional and national elections held yesterday.

The Kuala Lumpur Composite index rallied 3.96 points or 0.4% to 908.41 as brokers said the poll had handed Abdullah a resounding mandate to press on with reforms including a popular crackdown on corruption.

The risers today included electricity generator and distributor Tenaga Nasional, which gained 10c or Tokyo stocks sagged as Wall Street's Friday slip was singled out for blame.

Exporters backtracked in response to the softer US market as consumer electronics group Sony dipped 60 yen or 1.4% to 4210. Rival Matsushita gave up eight yen or 0.5% to 1,554.

The Nikkei 225 eased 100 points to close at 11,318.51 points.