Shares closed substantially higher yesterday as trading gained momentum on the back of a rally overnight on Wall Street, dealers said.
They said confidence was growing that the US Federal Reserve's effort to loosen up the credit market might be working.
The TAIEX closed up 239.38 points or 2.82 percent at 8,732.84 on turnover of NT$155.05 billion (US$4.71 billion).
Risers led decliners 1,532 to 208, with 150 stocks unchanged.
Gains in regional markets in the morning also boosted Taipei stocks across the board.
Japan's benchmark Nikkei 225 index jumped 415.68 points or 2.61 percent to close at 16,316.32 on the Tokyo Stock Exchange, while China's benchmark Shanghai Composite Index rose above the 5,000-level yesterday for the first time and closed at 5,032.49.
Hong Kong's benchmark Hang Seng Index rose 2.8 percent to close at 22,966.97 and major indexes also rose in South Korea, Australia, Malaysia, New Zealand, Singapore and Thailand.
"Firmer global markets helped the domestic market defend its strong showing throughout the session," said Michael On (洪瑞泰), president of Beyond Asset Management Co (晉昂證券投顧).
Teco Electric & Machinery Co (東元電機) closed up NT$0.60 at NT$17.80 after news its board has approved a proposal for the company to invest up to US$20 million in US-based Syntax-Brillian Corp.
On the foreign exchange market, the New Taiwan dollar continued weakening against its US counterpart, closing NT$0.006 lower at NT$32.945. Turnover was US$695 million on the Taipei Forex Inc.