Thomson Financial News
12.01.08, 01:40 AM EST

By Kelvin Soh

TAIPEI, Dec 1 (Reuters) - Taiwan stocks rose 1.3 percent to a fresh two-week closing high on Monday, as financial shares such as Taishin Financial surged on expectations of the signing of a cross-strait financial services agreement.

The main TAIEX share index closed 57.94 points higher at 4,518.43, its highest close since Nov. 12, as tourism shares also gained on hopes of higher Chinese tourist numbers.

The banking and insurance sub-index jumped 4.02 percent, while Taishin rose by its 7 percent daily limit.

Turnover was thin at T$66.9 billion ($2 billion), but higher than Friday's T$57.7 billion, and was the highest level in about three weeks.

'We expect the cross-strait financial services agreement to be signed in the first half of next year, so that is pushing financial stocks up," said Andy Wu, an analyst at Reliance Securities.

'Sean Chen (the newly appointed chairman of the Financial Supervisory Commission) is also more interventionist than his predecessor, so I think the market expects more support if there is trouble.'

Tourism shares got a boost from local media reports that Taiwanese companies were sending their Chinese employees to Taiwan for junkets.

The island's two major airlines, China Airlines and Eva Airways, both went limit up as an increase in Chinese tourists would be good for their load factors.

Hotel operators also benefited, with Ambassador Hotel climbing limit up. The tourism and transport sub-indexes both closed more than 3 percent higher.

'Airline share prices have been falling for a while now,' said Theresa Chueh, an analyst at Taiwan International Securities.

'They were first hit by surging oil prices when the economy was doing well, then they were hit by fears of falling demand when the economy was doing badly, so there is some correction today.'

The tech sector also managed to fight off a slew of bad news, with the electronics sub-index closing 0.46 percent higher.

Hon Hai was 1.4 percent higher at the session's close, after its subsidiary Foxconn announced on Friday it would lay off 1,500 workers in Hungary, more than half of its total workforce in the country, as orders waned.

Top contract chipmaker TSMC also managed to shake off the morning's losses to close unchanged after it told department heads to cut costs by 20 percent.