Stocks fall, led by AU Optronics

Stocks snapping a three-day rally. AU Optronics Corp (友達光電) and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) declined on concern their gains this year may have outpaced earnings growth.

The TAIEX shed 42.77, or 0.8 percent, to 5673.18. The futures contract for September delivery fell 1.4 percent to 5675. About three stocks declined for every two that gained.

AU Optronics fell as some investors worried the stock's 123 percent gain this year has outpaced its profit growth. Shares of TSMC have gained 69 percent this year, compared with the 27 percent gain in the key index.

"Stocks that have rallied too far ahead of the recovery will have to be pulled back and wait for the recovery to catch up," said Barro Liao, who helps manages the equivalent of US$4.2 billion in Taiwan equities at Prudential Securities Investment Trust Co (保誠投信).

TSMC NT$0.50, or 0.8 percent, to NT$66.50. AU Optronics fell NT$1.50, or 3.3 percent, to NT$43.40.

China Airlines Co (華航), the country's largest airline, gained NT$0.05, or 0.4 percent, to NT$13.95 on optimism after an increase in travel in the Asia-Pacific region. Abacus International Pte, Asia's largest travel and airline ticket reservation company, said bookings in the region rose by almost 15 percent in July from a year ago after SARS was contained. Rival EVA Airways Corp (長榮航空) rose NT$0.30, or 2.3 percent, to NT$13.20.

China Development Financial Holding Corp (中華開發金控) fell NT$0.25, or 1.9 percent, to NT$12.75 after foreign investors sold 13 million more shares than they bought of the company on Tuesday.