Taiwan stocks rose nearly half a percent in a broad rally on Monday, encouraged by US gains and comments from China's leaders that raised hopes a proposed anti-secession law would not worsen political relations. The TAIEX share index ended up 0.43 percent at 6,220.52 points, at one point testing a 10-month intraday high on gains in shares like Yang Ming Marine. But momentum slowed as turnover remained moderate at T$86.6 billion.
"From comments over the weekend, the general perception is that the anti-secession law will not change China's basic policy toward Taiwan," said Richard Tsai, a vice president at Grand Cathay Securities in Taipei.
Chinese Premier Wen Jiabao vowed on Saturday to work for peaceful reunification with self-ruled Taiwan, seeking to dispel alarm over the anti-secession law.
His comments helped China plays, which had been hurt in previous sessions amid fears the law could provide Beijing with a legal basis for attacking Taiwan.
The transportation sub-index rose 2.74 percent, outperforming all sectors, after Chinese officials seemed to play down the possible impact from the anti-secession law, which is expected to be approved this week.
The sub-index is a barometer for China ties as it tends to rise if investors think a stable political climate can increase the likelihood of direct transportation links across the Taiwan Strait.
Shares in Yang Ming Marine Transport Corp added 3.75 percent to T$33.20, while EVA Airways, the island's number-two carrier, added 0.91 percent to T$16.55.
Sentiment was also boosted by a 0.59 percent rise on the US Nasdaq and a 0.99 percent gain on the Dow Jones average to a more than 3-1/2 year high on Friday.
Major tech exporters such as Taiwan Semiconductor Manufacturing Co (TSMC), the world's top contract chipmaker and the market's most heavily weighted issue, also rose, putting aside recent worries over the strong Taiwan dollar.
TSMC gained 0.57 percent to T$52.80, helping the heavily weighted electronics sub-index 0.30 percent higher.
However, Mediatek Inc, the world's largest provider of DVD chips, fell 1.74 percent to T$226.0 after posting a 14.15 percent year-on-year drop in February sales, reminding investors of the doubts about tech demand this year.
The over-the-counter market's TAISDAQ index rose 1.17 percent to 121.50, and March TAIEX index futures rose 0.53 percent to 6,231.