Taiwan stocks plunged 2.73 per cent Thursday amid heavy selling triggered by US financial turmoil and Wall Street's sharp fall overnight, dealers said.

The Weighted Price Index of Taiwan Stock Exchange opened down 4.19 per cent as jittery investors dumped their holdings, but government funds soon moved in to buy heavily to ease the sliding trend, allowing the index to close at 5,641.95 points, down 158.92 points, or 2.73 per cent, dealers said.

In mid-morning amid heavy sell-offs, Finance Minister Lee Sush-der hinted after a Cabinet meeting Thursday that "conditions are right" for the state-owned National Stabilization Fund to intervene due to volatility in global markets.

All eight major sectors fell, with construction sub-index shedding 6.7 per cent to become the day's biggest loser, followed by financial's 6.6 per cent and paper's 5.6 per cent.