Taiwan stocks post biggest daily drop in 2 weeks

* Investors sell technology shares after recent run-up

* Powerchip rises after seeking state funds, profit hopes

* Mediatek underperforms on negative brokerage note

TAIPEI, Oct 21 - Taiwan stocks closed 0.67 percent lower on Wednesday, snapping a five-session winning streak, as losses on Wall Street triggered selling in technology shares, including Mediatek Inc.

The main TAIEX share index finished down 52.02 points at 7,701.50, posting its biggest single-day percentage fall in nearly two weeks. Turnover was about the same as Tuesday's T$125 billion ($3.9 billion).

Chip designer Mediatek declined 0.77 percent after Deutsche Bank reiterated its "sell" rating on the stock on concerns of weaker-than-expected demand and order shifts to rival Spreadtrum. The electronics sub-index fell 0.67 percent.

"The upward trend seemed a little shaky after the recent run up, but the fall is far from alarming as this was just a technical correction and the outlook for the broader economy is still optimistic," said John Chiu, a vice president at Fuh Hwa Securities Investment.

Other tech heavyweights, such as TSMC and Hon Hai, also slipped. TSMC fell 0.65 percent, while Hon Hai dropped 1.13 percent.

Powerchip Semiconductor Corp, Taiwan's top PC memory-chip maker, rose 3.03 percent after it submitted a proposal to the government to request funds of T$4.5 billion to set up a new flash memory chip company.

Its smaller rival Nanya Tech edged up 0.23 percent as it decided not to submit a restructuring plan to the government. Nanya Tech will hold its third quarter investor conference later in the day.

"Fundamentals for the DRAM sector are improving along with the economy, and it is good that Powerchip decided that it would take this strategic move to ramp up its flash business," said Andrew Deng, an assistant vice president at Taiwan International Securities Corp.

Taiwanese DRAM chip makers had lost money for the past year in a global downturn triggered by oversupply, but DRAM prices have rebounded recently as PC demand recovers.

AU Optronics, Taiwan's top flat-panel maker, fell about 2 percent.

An executive of Haier Group is set to visit AU's chairman next week, paving the way for them to set up a strategic alliance in procurement, research and development and technology, a local newspaper reported.

---------------------TAIEX IN PERSPECTIVE------------------

Move on day -0.67 pct

Close on day 7,701.50

2009 intraday high 7,811.92

2009 intraday low 4,164.19

All-time high 12,682.41 12 FEB 1990 ------------------------------------------------------------

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