Share prices closed down 1.12 percent yesterday in reduced trade following Wall Street's sharp falls overnight amid mounting concerns over inflation, dealers said.
They said the technology sector was also hit by a report that companies will be required to start declaring employee bonuses as an expense in their financial results from next year.
The weighted index closed down 82.49 points at 7,278.96 on turnover of NT$127.72 billion (US$4.07 billion). Decliners led risers 468 to 369, with 92 stocks unchanged.
A total of 10 stocks closed limit-down and 50 limit-up.
"The big decline on Wall Street triggered a knee-jerk reaction here, at a time when the local bourse was expected to experience a hiatus anyway," said Alex Huang (黃國偉), an assistant vice president at Barits International Securities (倍利國際).
It makes perfect sense for local shares to consolidate recent gains as the index approaches technical resistance at its 24-day moving average, he said.
Huang said foreign investors became somewhat cautious after their extended buying spree over the past month.
But "the fact that our market did not lose as much ground as regional counterparts indicates they would not call it a day yet," he said, adding that "downside support could readily emerge at 7,200 points."
Taiwan Semiconductor Manu-facturing Co (台積電) closed down NT$1.70 at NT$64.90 and United Microelectronics Corp (聯電) was down NT$0.40 at NT$20.60.
MediaTek Inc (聯發科技) dropped NT$14.50 to NT$400.00 and High Tech Computer Corp (宏達電子) fell NT$75 to NT$1,085.