Taiwan Shares Gain Most in 6 Years on Possible Support Measures

By Tim Culpan and Chinmei Sung

Sept. 8 (Bloomberg) -- Taiwan stocks climbed, driving the benchmark index to its biggest gain in six years, after the government said it may take action to boost equities.

Cathay Financial Holding Co. and Fubon Financial Holding Co., Taiwan's two largest financial-services companies, led banking stocks to the largest advance in 14 years as the U.S. government's takeover of Fannie Mae and Freddie Mac eased concern that losses at financial companies this year will widen.

``It's obvious the government is working hard to raise investor confidence by suggesting they will make some moves,'' said Bevan Yeh, who helps manage the equivalent of $1.2 billion at Prudential Financial Securities Investment Trust Enterprise in Taipei. ``Freddie and Fannie are also giving fund managers a reason to buy in.''

Taiwan's Taiex index added 351.41 points, or 5.6 percent, to 6,658.69 at the close of trade. The advance was the largest since Oct. 15, 2002, and the most among Asian benchmark measures today. The 35-member Financials and Insurance sub-index surged 6.8 percent, the most since Jan. 17, 1994.

A decline in global stock markets this year has dragged the Taiex down by 22 percent. The Taiwan government may propose measures to boost stock prices and consumer demand at its weekly meeting Sept. 11, Carolina Lin, a secretary at the Government Information Office, said Sept. 6.

Taiwan's Financial Supervisory Commission also plans to ease rules on stock buybacks for financial-services companies, lifting to 12 from five the number of companies allowed to participate in buyback programs.

Cathay added NT$3.70, or 6.9 percent, to NT$57.60. Fubon surged NT$1.70, or 6.9 percent, to NT$26.30. At least 12 of the 35 members in the Taiex's financials sub-index surged by their daily limits.

The U.S. Treasury Department will buy up to $100 billion of senior-preferred stock in Fannie Mae and Freddie Mac, the biggest U.S. mortgage lenders. Taiwan companies owned $20 billion in securities linked to Freddie and Fannie when they reported their holdings in July.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Formosa Plastics Corp. (1301 TT) added NT$1.80, or 3.1 percent, to NT$59.90. The company will spend NT$200 billion ($6.3 billion) to expand its petrochemical and energy plants in western Taiwan, the Economic Daily News reported.

HTC Corp. (2498 TT) added NT$36, or 6.9 percent, to NT$560 after the company, Taiwan's largest cellphone vendor, posted a 34 percent climb in August sales to NT$12.71 billion.

Taiwan Semiconductor Manufacturing Co. (2330 TT), the world's largest custom-chip maker, climbed NT$3.70, or its 7 percent limit, to NT$56.70, the most since Jan. 13, 2003. SinoPac Financial Holdings Co. upgraded the stock to ``outperform'' from ``in-line,'' in anticipation of a rebound in orders next year.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.