http://www.newsday.com/ap/topnews/ap922.htm

By DIRK BEVERIDGE, AP Business Writer

TAIPEI, Taiwan (AP) -- Stocks plunged Monday amid fears that President-elect Chen Shui-bian could push Taiwan into a war with China. Most companies' shares fell as far as the law allows.

Taipei's market was off by 2.8 percent after about an hour of trading as the bourse reopened following Saturday's election that swept Chen to power, ending more than a half-century of governance by the ruling Nationalist Party.

Shares were able to drop only as much as 3.5 percent under emergency measures announced Sunday night by Finance Minister Paul Chiu -- and most companies listed on the Taipei exchange fell by the maximum early Monday.

Taiwan's Weighted Price Index started with a quick loss of 3.2 percent then inched higher, though it was not immediately clear if the government had intervened with big share purchases to prop up prices -- as it said it would if necessary.

Shares also dipped in Hong Kong, where the Hang Seng Index was off by 1.2 percent early Monday on concerns about stability in the Taiwan Strait.

Indicating Taiwan's political upheaval seemed like a market threat of similar magnitude to the devastating earthquake in September that closed share dealings for several days, Chiu decided to halve the normal 7 percent limit for one-day stock drops for the next two weeks. However, Chiu did not alter the daily limit of 7 percent increases.

The government also said it would intervene and buy shares if necessary to try to protect prices and the Taiwan dollar -- and the central bank moved quickly to stabilize the currency. Amid heavy foreign exchange dealings, the Taiwan dollar was off by only a tenth of a percentage point at the rate of 30.798 to he U.S. dollar early Monday.

Although it was not immediately clear if the government was buying shares to prevent even sharper drops, Vice Finance Minister Yen Ching-chang appealed for investors to stay calm and accept the results of the election.

Yen warned the government could not keep buying indefinitely against a prolonged market sell-off.

Chen's win could aggravate tensions with China, which is disturbed by his party's pro-independence stance. China views Taiwan as a rebel province and says it must reunify with the mainland at some point.

''The question is how many days of steep selling we're going to see,'' said Peter Kurz, the top executive in Taiwan for Wall Street investment bank Merrill Lynch.

But others say the big sellers may have bailed out last week, when Taiwan spent the equivalent of $3.3 billion to contain a share slide. Prices stabilized but never recovered from the spooky loss of 6.6 percent in one session, finishing the week with a drop of 7.1 percent.

China responded Saturday night to Chen's election by issuing a conciliatory wait-and-see statement -- which stood in stark contrast to Beijing's earlier saber-rattling -- and that could help prevent a massacre on the market, analysts say.

-- viewer (justp@ssing.by), March 19, 2000

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-- Deb M. (vmcclell@columbus.rr.com), March 20, 2000.