Taiwan's financial markets turned down sharply Monday amid mass protests over Saturday's presidential election and concern over future policy toward China. The government is still considering whether to intervene in the markets.

Taiwan's stock index lost close to seven percent, with many shares dropping their full daily limit, in one of its biggest selloffs in the past few years.

The plunge came as supporters of defeated presidential candidate Lien Chan held a second day of protests across the island to demand a recount in Saturday's extremely close election.

The new Taiwan dollar also saw a sharp decline, losing over three cents against the U.S. dollar, to a rate of 33.285.

Taiwan's Financial Affairs Ministry said before trading that it would intervene in the markets if a panic set in, but no action was taken.

Some local analysts said the market losses stemmed less from the protests and more from investors' disappointment over the defeat of Mr. Lien, who ran under an alliance of parties known as the Pan-Blue.

Peter Sutton, head of research for securities firm CLSA Taiwan, says the market expected Pan-Blue to win, ushering in closer economic ties with China.

"The changes in policy that the Pan-Blue had promised are now much less likely to take place under the current government in terms of relations with China," he says. "Therefore, there are some fewer opportunities for businesses, and that has to be factored out of share prices."

Mr. Sutton adds that, in the case of the stock market, the losses were also fueled by a decline Friday in U.S. technology stocks.

Local analysts say Taiwan's economic fundamentals remain sound, and a rebound in the markets is likely to begin within a week.