Jan. 15 (Bloomberg) -- Taiwan's stocks surged the most in almost five months, paced by Cathay Financial Holding Co. on speculation the newly elected parliament will allow banks to expand in China, the island's largest trading partner.

Fubon Financial Holding Co. climbed after Yuanta Securities Co. raised its share-price forecast and earnings estimates for the company.

``Positive sentiment towards financial shares'' will continue, Tess Wang, banking analyst at Yuanta, said in a report today.

The Taiex index rose 282.07, or 3.5 percent, to 8,455.48 at 9:36 a.m. in Taipei, its steepest percentage increase since Aug. 20. About 22 stocks gained for every one that declined. Futures due in January added 3.1 percent.

Cathay Financial, the biggest Taiwanese life insurer, climbed NT$5, or 6.9 percent, to NT$77.10. Fubon Financial, the island's biggest property insurer, advanced NT$2.25, or 7 percent, to NT$34.55.

To contact the reporter for this story: George Hsu in Taipei at georgehsu@bloomberg.net.

Last Updated: January 14, 2008 20:52 EST