TAIPEI: Taiwan will allow mainland investors to acquire stakes in local government-run banks by buying their shares in the market, the Economic Daily said yesterday in what would be the latest sign of easing ties across the Taiwan Straits.

The report, citing finance chief Lee Sush-der, also said Taipei would not sell its holdings to mainland investors in government-run lenders, such as First Financial, Mega Financial, Hua Nan Financial, Chang Hwa Bank and unlisted Taiwan Financial.

Taiwan stocks rose 0.72 percent yesterday to a near nine-month closing high, with financial shares like Mega up on hopes of potential mainland investments, but the gain was limited by concerns over a flu outbreak.

The main TAIEX share index closed 48.03 points higher at 6,703.62, its best finish since Sept. 1, 2008, and the fourth consecutive gaining session.

The index was in negative territory early in the day after Taiwan reported its first confirmed H1N1 flu case.

Turnover was active at NT$191.6 billion ($5.8 billion), but lower than Tuesday's NT$218.8 billion.

"The death rate of H1N1 virus is quite low and the virus is curable, so its impact on the market should be smaller than SARS," said Bevan Yeh, a senior fund manager of Prudential Financial Securities.

"Japan's market is another indicator. There are much more flu cases in Japan, but the impact on its stock market didn't last too long."

The transportation sub-index fell 0.28 percent, with China Airlines and Eva Airways down 2.47 percent and 1.46 percent, respectively.

The banking and insurance sub-index was up 2.2 percent. Mega Financial jumped limit-up and First Financial rose 2.94 percent.

Shin Kong Financial, parent of Taiwan's No. 3 life insurer, rose 4.6 percent after saying on Tuesday it expects RMB30 million yuan of insurance premiums this year as it opens business on the mainland.

China Daily - Reuters

(HK Edition 05/21/2009 page16)