UPDATE 2-Taiwan urges state-owned banks to buy stocks as market tumbles - sources

(Adds closing stock index)

TAIPEI, Aug 19 (Reuters) - Taiwan’s Finance Ministry has called state-owned banks to suggest they buy an “appropriate” amount of stocks amid falls on the island’s stock market, five people familiar with the matter told Reuters on Thursday.

Asian stocks slumped to their lowest levels of the year and the dollar hit fresh highs on Thursday as a double-whammy of worries about global growth and an end to central bank support drove nervous investors toward safety.

Taiwan’s benchmark index led the broad selling in Asia and closed 2.7% lower at a three-month trough. While the index rose 1% on Wednesday, it had fallen for the previous nine straight sessions.

The sources, who spoke on condition of anonymity as they were not authorised to speak to the media, said the ministry had called senior bank executives to express a wish that they buy stocks.

“The Finance Ministry called and said if there’s an appropriate opportunity, we can buy some stocks,” one source said.

The sources said the suggestion was that they buy an “appropriate” amount of shares, especially in large caps with good fundamentals.

“The Finance Ministry believes that it’s a bit unreasonable for the stock market to keep falling and to fall for so many days,” a second source said.

The ministry did not immediately answer calls seeking comment.

Taiwan’s government frequently intervenes in the market if it believes falls have become irrational or are too steep, and has a fund it can activate to buy stocks and bolster sentiment if needed.

In a related move to offer policy support, Taiwan’s Cabinet said on Thursday the government would extend a tax break for day trading on the stock market for a further three years.

The government halved the tax to 0.15% in 2017, in a policy set to end this year. The proposal to extend the tax break still needs to be approved by parliament. (Reporting by Liang-sa Loh; Writing by Ben Blanchard; Editing by Himani Sarkar and William Mallard)