TAIPEI, June 4 (Reuters) - Taiwan stocks fell 0.3 percent on Thursday, as a string of dismal U.S. economic data damped economic recovery hopes, sending technology shares including bellwether TSMC and HTC lower.

By 0212 GMT, the main TAIEX share index had fallen 18.27 points to 6,874.87, after breaching the psychologically important 7,000-point level and hitting a nine-month high earlier this week.

The electronics sub-index was down 0.62 percent. Taiwan Semiconductor Manufacturing Co (TSMC), the world's top contract chipmaker, fell 2.34 percent, and smartphone maker HTC was down 1.9 percent.

"Upward momentum for the market still exists, but many investors have chosen to stay on the sidelines, causing the market to trade in a narrow range today," said Andrew Deng, an assistant vice-president at Taiwan International Securities.

"The market still has a chance to test above 7,000 points as ties between Taiwan and China continue to improve," said Deng, who forecast the market to trade between 6,850 and 7,000 points for the rest of the week.

Investors were also cautious before Taiwan companies release May sales figures by June 10, analysts said, with many technology companies expected to post weaker results from a month before.

China will invest 1 trillion yuan ($211billion) to set up 3G cellular networks over the next three years, and will purchase up to 300 million mobile phone handsets, creating potential business opportunities for Taiwan's chipmakers and handset manufacturers, local media reported on Thursday.

VIA Technologies Inc, the island's top designer of PC processors, jumped 5 percent, and AU Optronics, Taiwan's No.1 flat panel maker, was up 0.29 percent.

Chunghwa Telecom and China Telecom would build an undersea cable linking Taiwan's Kinmen island to the Chinese city of Xiamen, the first direct undersea cable linking the two sides, local media reported.

Chunghwa Telecom advanced 1.11 percent.

Electronic parts distributor WPG Holdings was flat after a company executive told Reuters it aimed to double sales revenue and increase its headcount in coming years as it eyed acquisition targets in its key mainland China market.