EMERGING MARKETS-Taiwan shares rally 6% as stabilisation fund, chipmakers spark recovery

By Nichiket Sunil

Nov 9 (Reuters) - Taiwan stocks rose more than 6% on Monday, underpinned by chipmakers, after the government activated its stock stabilization fund following a steep selloff last week that wiped trillions of dollars from global markets.

The benchmark stock index .TWII surged as much as 6.6%, its sharpest percentage gain since July. TSMC 2330.TW, the world's top contract chipmaker that accounts for nearly 40% of the bourse by weightage, climbed 7.3% earlier in the session.

Last week, the index recorded its worst weekly decline since 2001 after Democrats' sweep in the US midterms fueled concerns about tighter scrutiny of AI investments and infrastructure spending, adding to worries over elevated borrowing costs.

The selloff prompted Taiwan to authorize its National Financial Stabilization Fund on Friday to support the market, while its economy ministry said demand for emerging technologies, including AI, is expected to continue expanding.

"The government has stepped in with the stabilisation fund and short-selling curbs, and some dip buyers are coming in early," said Anna Wu, founder of Floodlines Research.

"How sustainable and effective these short-term local remedies are, we don't know yet. I wouldn't be too optimistic until we see a decisive lift in AI sentiment."

Chipmakers led gains across East Asia as investors bought back technology shares after an AI-driven selloff last week. In South Korea, benchmark KOSPI .KS11 index gained 1.4% after shedding 11.7% last week.

Strong gains in Taiwan and South Korea, which together account for a significant share of MSCI's emerging markets benchmark .MSCIEF, helped lift the index more than 2%, recouping part of last week's decline of over 4%.

While equities rebounded sharply, regional currencies were far more subdued, with the dollar index little changed on the day.

The Korean won outperformed its peers, strengthening to 1,356.20 per dollar.

"Asia FX performance is increasingly being shaped by the global technology cycle and cross-border portfolio flows... KRW remains particularly sensitive to semiconductor equity performance," analysts at MUFG said in a note.

In contrast, Philippine assets .PSI came under pressure after domestic data showed economic growth slowed for a fifth consecutive quarter.

The Bangko Sentral ng Pilipinas has raised interest rates by 125 basis points since April, including a larger-than-expected 50-basis-point increase last month, as it seeks to tame inflation despite slowing growth.

Indonesian stocks .JKSE rose roughly 1% ahead of MSCI's November index review this week, though gains were tempered by concerns over the country's continued inclusion in the index provider's emerging-market benchmarks.

The rupiah weakened to 18,105 per dollar, remaining close to the record low of 18,190 earlier this year.

Investor sentiment toward Indonesian assets has weakened after MSCI warned the country risks removal from its emerging-market indexes over concerns about market accessibility and transparency.

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