Stock index ended at its highest level in two and a half months yesterday after strong gains on Wall Street overnight, with bank shares among the best performers.
The TAIEX rose 87.92 points, or 1.5 percent, to end at 6,088.49.
Dealings totaled NT$87 billion (US$2.72 billion), more than double Tuesday's NT$37.92 billion (US$1.15 billion).
Shares rose across the board, with 712 ending higher, 76 lower and 88 unchanged.
"It's a big breakthrough, considering the past few week's lackluster performance," said Derek Lam, Fubon Securities Co's (富邦證券) head of trading.
Overnight gains in US shares drew back to the market investors who had been on the sidelines for weeks, traders said.
The construction sector was up 3.58 percent while tourism rose 2.91 percent, financials 1.8 percent and electronics 1.29 percent.
The legislature's expected approval for a bill to expand the size of the Financial Restructuring Fund (金融重建基金) and for another bill to cut down rates on land-value incremental tax also gave the market a boost, analysts said.
Earlier yesterday, the Cabinet approved a proposal to permanently lower the rates from the current 40 percent, 50 percent and 60 percent to 20 percent, 30 percent and 40 percent, respectively.
Chang Hwa Bank (彰化銀行), one of Taiwan's three major government-controlled commercial lenders, rose 4.4 percent to NT$21.4, while Taiwan Business Bank (台灣企銀) gained 4.2 percent to NT$12.3.
Electronics shares gained 1.3 percent, as foreign investors are expected to start returning to the market soon after the Christmas holidays.