TSMC and China Airlines lead the decliners on TAIEX

Stocks fell, led by the nation's biggest exporters, after the US, UK and Spain gave the UN Security Council one day to break its impasse over whether to use force against Iraq, fueling concerns that a war may begin as early as this week.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) led the drop. A war in the Middle East may curb global economic growth, damping demand for electronics.

Transportation stocks such as China Airlines Co (華航) slid after the government warned against travel to China and Southeast Asia, where a pneumonia-like respiratory illness has killed at least nine people and infected more than 150.

"Many investors will avoid holding stocks ahead of the final showdown of war against Iraq," said Jerry Chen, who manages the NT$3.5 billion (US$101 million) Excellent Fund at First Global Investment Trust Co (元大投信).

The TAIEX shed 118.18, or 2.6 percent, to close at 4,357.99, its first decline in four sessions and its biggest drop in three weeks. MSCI Taiwan futures for February delivery in Singapore fell 3.8 percent to 184.50. The Taiwan Futures Index dropped 3.6 percent to 4318. Decliners outnumbered gainers 637 to 50 with 49 stocks unchanged. Volume was thin at NT$36.55 billion (US$1.05 billion).

TSMC, the world's largest maker of computer chips on a subcontracting basis, fell NT$1.50, or 3.3 percent, to NT$44. The stock fell despite Dutch firm Royal Philips Electronics saying last Friday it plans to increase chip outsourcing to three foundry chipmakers in Asia, notably TSMC.