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Weakening Krathon expected to hit land early on Thursday

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Forecast to travel up populous western coast

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Cities, counties declare holiday for Wednesday

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Financial markets shut, TSMC sees no major impact

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Hundreds of flights cancelled

(Adds Kaohsiung mayor's comments, evacuations; paragraphs

4,5,6)

By Yimou Lee, Fabian Hamacher and Ann Wang

KAOHSIUNG, Taiwan, Oct 2 (Reuters) - Taiwan shut down on

Wednesday, grounding hundreds of flights and closing schools,

offices and financial markets ahead of the arrival of a

weakening Typhoon Krathon, forecast to lash the coast with storm

surges and torrential rain.

Officials in the key port city of Kaohsiung, set to be in

the eye of the storm, told people to stay home and avoid the

sea, rivers and mountains, warning of a repeat of 1977's Typhoon

Thelma that killed 37 and devastated the city of 2.7 million.

Although the typhoon has weakened, the threats from a storm

surge, strong winds and rain remain as it slowly makes its way

towards Taiwan's coast, weather forecasters said.

The typhoon would lose power once it hit land, said

Kaohsiung mayor Chen Chi-mai, but would still bring intense

winds and rain.

"But if it moves north, the winds will strengthen again, so

the threat to Kaohsiung will continue to exist, and people

cannot take this lightly," he told reporters.

All the island's cities and counties declared a day off,

shutting financial markets and cancelling domestic

flights, along with 246 international ones, while more than

10,000 people were evacuated, mostly in the south and east.

Typhoons often hit Taiwan's mountainous and sparsely

populated east coast facing the Pacific, but Krathon is set to

make landfall on its flat western plain.

It is forecast to hit between Kaohsiung and its neighbouring

city of Tainan in the early hours of Thursday, before heading

northeast up towards Taipei, the capital, the Central Weather

Administration (CWA) said.

"Because of Typhoon Gaemi being quite severe earlier this

year, everyone is more cautious and prepared this time around,"

said sales representative Yu Ren-yu, 35, picking up sandbags at

a government office, referring to July's storm that killed 11.

"First be prepared, then we can face this typhoon."

The typhoon has revived the older generation's bad memories

of Thelma, prompting extra precautions, said Chou Yi-tang, a

government official working in the Siaogang district home to the

airport.

"We were hit directly by the eyewall," he added, describing

events almost five decades ago. "Power was out for two weeks and

no water for almost a month. It was disastrous."

More than 700 sandbags have been distributed in his

district, a record for a typhoon, while authorities are making

more to meet demand, Chou said.

Taiwan's defence ministry said it had put more than 38,000

troops on standby.

The fire department reported 46 injuries, mostly in the

mountainous eastern county of Taitung, with one person missing

in the central county of Yunlin.

The north-south high speed rail line stayed open, but scaled

back services.

TSMC, the world's largest contract chipmaker and a

major Apple and Nvidia supplier, said on Tuesday it did not

expect the typhoon would have a significant impact on

operations.

TSMC's factories are along the west coast, some in the city

of Tainan.