The weighted index rose 27.92 points to 7,599.88 on turnover of NT$105.61 billion.

Gainers led losers by 1,295 to 1,146 with 268 stocks unchanged.

The market opened up 0.64 percent with buying triggered by an extended rally on Wall Street Friday, but selling immediately followed to turn many investors away with daily turnover down, dealers said.

"It was no surprise that investors tended to pocket recent significant gains as many stocks, in particular high-tech firms, looked expensive," said President Securities analyst Steven Huang.

Rotational buying was active with old-economy stocks in focus, dealers said.

Boosted by ample liquidity, Kuo Yang Construction gained 6.78 percent to 18.90, Prince Housing rose 4.98 percent to 16.86 and Cathay Real Estate added 2.72 percent to 15.10.

Among firms packed with large property assets, Shihlin Paper rose 4.05 percent to 79.60 and Nankang Rubber Tire gained 2.84 percent to 38.00.

"The interest in these stocks was strong on high hopes of rising property prices. But their weighting is not large enough to lift the broader market too much," Huang said.

"I expect consolidation will continue to dominate the trade over the next few sessions," he said.

High-tech firms closed mixed on profit-taking.

Taiwan Semiconductor Manufacturing Co rose 0.16 percent to 61.20 while rival United Microelectronics Corp close down 0.65 percent at 15.40.

Flat panel maker AU Optronics gained 1.10 percent to 32.25, but smartphone producer HTC fell 0.57 percent at 346.00.

In the financial sector, Cathay Financial closed down 0.83 percent at 60.00 and Fubon Financial was 0.64 percent lower at 39.05.

Taiwan's Taiex index rose 27.92, or 0.4 percent, to 7,599.88 at the close of Taipei trading.

Chip makers: ProMOS Technologies Inc. (5387 TT) surged by its 6.7 percent daily limit to NT$1.92, the highest since Jan. 14.

Powerchip Semiconductor Corp. (5346 TT) advanced 6.8 percent to NT$3.45, the highest since Sept. 8. The benchmark price of dynamic random access memory, or DRAM, chips gained 8.8 percent to US$2.34 on Friday.

China Motor Corp. (2204 TT), a Taiwanese carmaker that builds Mercedes-Benz vans in China, climbed 3.2 percent to NT$24.05, the highest since June 5, 2008.

The company said September sales grew 31 percent to NT$2.29 billion from a year earlier.

Mercuries Data Systems Ltd. (2427 TT), a Taipei-based automated teller machine vendor, jumped 7 percent to NT$7.95 after the company said September sales increased 64 percent to NT$177 million.

New Focus Auto Tech Holdings Ltd. (9106 TT), a Hong Kong- based auto parts maker, grew 7 percent to NT$7.49 from the NT$7 offer price on its first day of trading.