Taiwan stocks closed higher on Friday as microchip heavyweights like TSMC got a boost from Intel Corp's strong revenue outlook, but trade was cautious ahead of the legislative elections. The main TAIEX share index ended up 0.43 percent at 5,893.27 points, following on Thursday's 1.2 percent advance that had been fuelled by a drop in international oil prices.
Turnover was soft at T$52.16 billion.
Ratings agency Standard & Poor's lowered its outlook for Taiwan to negative from stable this week, saying tensions with China could rise if Taiwan's pro-independence ruling coalition gains a legislative majority at the December 11 polls.
With a majority, President Chen Shui-bian could push Taiwan closer to independence and away from the mainland, moves China has warned could lead to war. While investors shunned industrial shares in the paper and steel sectors, Taiwan Semiconductor Manufacturing Co (TSMC) the world's top contract chipmaker and the market's most heavily weighted stock, rose 1.88 percent to end at T$48.90.
Microchip packaging and testing firm Advanced Semiconductor Engineering Inc gained 2.58 percent to T$23.90 and memory chipmaker Inbound Electronics Corp rose 0.82 percent at T$12.25, after chip giant Intel raised its quarterly outlook on Thursday.
Financials, second only to techs in Taiwan's weighting, recouped losses to end 0.54 percent higher. Analysts said the sector's strong run could continue after the elections on hopes of more banking mergers next year.
Shares in Chang Haw Commercial Bank Ltd rose 1.5 percent to T$20.30 and Taiwan Business Bank, seen by the market as a potential take-over target, added 0.41 percent to T$12.15.
On a sour note, however, commodity issues retreated from recent advances due to rising product prices. For example, China Steel Corp, Taiwan's largest steel producer, fell 0.28 percent to T$35.70.