SINGAPORE, Reuters Taiwan39;s election could allay global concerns about the island39;s relations with China, while prompting a light selloff domestically on Monday as investors worry the result could hinder economic policy.

Vice President Lai Chingte won the presidency on Saturday, the third consecutive term for his ruling Democratic Progressive Party DPP, but the party lost its parliamentary majority, complicating Lai39;s spending plans and any intent to take an aggressive stance on China.

China, which claims Taiwan as its territory, had called Lai a separatist and troublemaker through and through, but took a gentler tone after the election, not mentioning him by name and saying the results revealed the DPP cannot represent the mainstream public opinion on Taiwan.

Analysts expect Taiwan39;s stock market to take a hit this week as the spectre of policy paralysis fuels selling in a market that is up 25 in little more than a year.

Yet the outcome is also a relief for investors who had feared the hawkish Lai would push for Taiwan39;s formal independence, something he has denied. Investors have worried about a hostile reaction from China and a chain reaction of sanctions that could cripple the global semiconductor industry.

I would imagine the reaction is negative. The market could read weak government in Taiwan, lots of external risks from the mainland and lots of internal risks, because there is no control of the legislature, said Alicia Garcia Herrero, chief…