Taiwan stocks extend gains as c.bank holds rates

* Financial shares climb as c.bank keeps rates steady

* Property shares up on expectations of increased
investment

* Hon Hai up on report of Hewlett-Packard contract
(Adds indexes, details and quotes)

TAIPEI, June 26 (Reuters) - Taiwan stocks rose 0.8 percent
in early trade on Friday, with financial shares such as Cathay
(2882.TW) climbing after Tawain's central bank kept interest
rates unchanged and said the economy had bottomed out.

The main TAIEX share index was 51.45 points higher
at 6509.06 as of 0221 GMT, further extending its near two-week
high that was hit the previous session.

"Lower interest rates means people are less willing to keep
their money in the bank,"said Michael On, a managing director
at Beyond Asset Management.

"They could take advantage of the low interest rates and
make start making investments, such as buying stocks or
investing in real estate."

Taiwan's central bank left its key interest rate unchanged
at a record low of 1.25 percent for the second straight time on
Thursday, and said it will only consider lifting rates when the
economy returns to pre-crisis levels. [ID: nTP263201]

Financial shares .TFNI climbed 1.12 percent as investors
bet that keeping rates unchanged would be good for financial
holding companies by keeping the cost of borrowing stable.

Cathay Financial, Taiwan's top listed financial holding
firm, and Fubon Financial (2881.TW), Taiwan's second largest
insurer, rose 0.61 percent and 0.63 percent, respectively.

Property shares rose on expectations that low interest
rates could lead to a spike in home sales. Property developer
Farglory (5522.TW) rose 3.85 percent, leading the broader
construction index .TCOI up 1.9 percent.

"Property shares could climb because some investors are
trying to maintain the value of their assets in the face of
possible inflation," Huang said.

Tech shares also rose, with key players such as Hon Hai
(2317.TW) and HTC Corp (2498.TW) leading gains on hopes of a
pick-up in domestic demand, and after consumer shares in the
United States rallied overnight.

Electronic maker Hon Hai rose 0.48 percent after a report
said that it will be the contract manufacturer for one of
Hewlett-Packard's (HPQ.N) notebook PCs, and is expected to ship
more than 2 million units in the next 5 quarters.

However, Powerchip Semiconductor (5346.TWO), Taiwan's
biggest DRAM chip maker, fell 1.94 percent after it said on
Friday its capital spending will likely to fall below T$5
billion ($152 million), lower than previously forecast.
[ID:nTPU001459]

For a table of foreign trading in Taiwan stocks,
double-click on [ID:nTP170358]

(Reporting by Joan Hsu; Editing by Kim Coghill)