Fears of a political crisis slammed the Taiwan stock market on Monday, wiping out $28 billion in investor wealth, and triggered central bank intervention to underpin the island's dollar.
Investors fled heightened risks after President Chen Shui-bian's wafer-thin election victory on Saturday was challenged by his opponent, Lien Chan.
Lien demanded the result be declared invalid, citing voting irregularities and amid suspicions an assassination attempt on Chen on Friday might have been staged.
Before the shooting, Lien was tipped to win - an outcome investors would have welcomed as he was expected to ease tensions with China.
The uncertainty reverberated throughout Greater China's financial markets, with Hong Kong's Hang Seng index falling 1.7 percent to 2004 lows. Stocks of companies with operations in Fujian, the Chinese province closest to Taiwan, plunged in China's domestic share market.
As financial markets wobbled, up to 1,000 Lien supporters protested in front of the presidential palace, shouting, "Recount, recount!" and "A-bian step down!", using the president's nickname.
Taiwan's main stock index, which had been the best-performing in Asia this year outside China, ended down 6.7 percent at 6,359.92, as most stocks fell their daily limit of seven percent. Still, foreign investors bought a net T$7.55 billion ($227 million) of stocks, the stock exchange said.
Despite the market rout and rising risk, Fitch Ratings said it was unlikely to change its A-plus sovereign credit rating.
"From what we've seen so far, I don't think it suggests to me that it's going to be a major problem," Brian Coulton, a senior director at Fitch Ratings in charge of Asian sovereign ratings, told Reuters.
The selling caught some analysts by surprise given the island's strong economic prospects.
"The fall was bigger than we had expected and the market was still waiting to see when the stock stabilisation fund enters the market," said Tu Jin-lung, president of Grand Cathay Investment Services. Tu said he expected further falls in the next two days, with initial support at around 6,000.
The Taiwan dollar eased only 0.2 percent to T$33.325. Taiwan had record foreign exchange reserves of US $225 billion at the end of February, the third-highest in the world, a war chest that awes market players. Government bond prices rose, pushing down 10-year yields to below the 2.28 percent closing average of the past year. The benchmark 10-year 93/4 bond yield fell 16 basis points to 2.17 percent.
Stock trading volume was a paltry T$47 billion against the daily average of T$152 billion last week as a flood of sell orders failed to find buyers.
Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract microchip maker, slumped limit-down to T$59.0. China Airlines, Taiwan's top carrier, fell the daily maximum to T$24.0. It had surged 76 percent so far this year as of Friday on anticipation of direct transport links with China in the case of a Chen loss.
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