Taiwan stocks at two-week closing low

Taiwan stocks ended down 1.36 percent at a two-week closing low on Wednesday, with banking shares such as Cathay Financial slipping after China moved to tighten its monetary conditions. China took its strongest step towards tightening monetary policy on Tuesday as the world's third-largest economy roars ahead, surprising investors with an increase in banks' required reserves that rocked global financial markets.
The main TAIEX share index fell 112.81 points to 8,196.56, its lowest close since December 31, 2009. Turnover shrank to T$141 billion ($4.4 billion) from T$147.1 billion in the previous session. "China's tightening of monetary policy points to the current rally on the TAIEX as being liquidity driven, and is a warning to Taiwan's market," said Andrew Deng, an assistant vice president with Taiwan International Securities Corp.
Cathay Financial, the island's biggest listed financial holding firm, dropped 2 percent, dragging the financial sub-index 1.93 percent lower. Commodity plays also slipped on fears that buyers will rein in spending after China raised its reserve requirements.
China Steel was down 2.41 percent, while rival Tung Ho Steel slipped 2.26 percent, pulling the steel sub-index down 2.39 percent. Formosa Plastics slid 1.41 percent, and rival Nan Ya Plastics fell 0.92 percent, with the plastics sub-index 1.4 percent lower.
"Semiconductors and flat-panel shares fell more today because they have risen for quite a few sessions, and foreign investors are selling these shares on fears they may have been overbought," said Tu Jin-lung, chairman of Grand Cathay Investment Services.
TSMC, the world's largest contract chip maker, slid 1.26 percent, while AU Optronics, the world's No 3 flat-panel maker, ended 2.82 percent lower. Mediatek, the world's No 2 cell phone chip supplier, dropped 1.97 percent, outperforming its peers in the PC and LCD sectors. Mediatek told Reuters on Tuesday it plans to increase its global staffing level by more than 10 percent this year as it rolls out new chips for smartphones.