Taiwan President Takes Office on China Pledges

Taiwan's new president took office on Tuesday with pledges to forge historic trade and transit ties with China, which claims the self-ruled island as part of its territory.

Ma Ying-jeou, 57, the Nationalist Party (KMT) candidate and a former Taipei mayor, officially took over from outgoing President Chen Shui-bian in a handover ceremony at the presidential palace, beginning a four-year term after his landslide win in March.

The pair shook hands and walked, smiling, through a presidential office hallway rimmed with military officials and KMT leaders to an auditorium where the Taiwan flag and a portrait of Sun Yat-sen, founder of modern China, hung in the background.

Ma campaigned for the presidency on a platform focused on breathing new life into Taiwan's economy and pushing Beijing for trade ties and a peace accord. 

China has claimed Taiwan since 1949, when Mao Zedong's Communists won the Chinese civil war and Chiang Kai-shek's KMT Party fled to the island. Beijing has vowed to bring Taiwan back under its control, by force if necessary.

"It's a big day," said Joseph Cheng, a political science professor at City University of Hong Kong. "China will definitely be expressing hopes for a new beginning."

Stocks Slip

Meanwhile, Taiwan stocks slipped 0.35 percent, taking a pause from a week-long rally. The main TAIEX share index was weaker, with contract chip maker TSMC pulling the electronics sub-index 0.26 percent lower. TSMC, the most heavily weighted stock, fell 0.4 percent.

The broader market had staged a 5.3 percent rally in the previous five sessions, ending at a fresh 2008 high on Monday, on optimism Ma will forge closer business ties with the mainland. The index is up more than 8 percent so far this year.

"There is profit-taking pressure today on concerns that China-Taiwan ties may not go as smoothly as what has been expected," said Jeff Chang, president of Cathay Securities
Investment Trust, which manages T$160 billion (US$5.25 billion) of client assets.

"We are not worried, though. We think Taiwan will establish direct links with the mainland, part of Ma's pledges."

One bright spot was DRAM shares, with Powerchip Semiconductor and Promos Technology both climbing. The gains came after shares of bigger South Korean rival Hynix Semiconductor fell after the company said its production of dynamic random access memory (DRAM) chips had been disrupted in a power outage.

Copyright 2008 Reuters. Click for restrictions.