The weighted price index of the Taiwan Stock market fell 364.34 points, or 6.14 percent, to 5565.29 points shortly after trading began.

The U.S. House of Representatives on Monday defeated a US$700 billion emergency rescue for the U.S. financial system. The Dow Jones industrial average plunged nearly 800 points, the biggest ever drop for a single day.

Before the market opened, Taiwanese Vice Premier Paul Chiu urged investors to have confidence in the island's export-driven economy and its financial markets.

Local banks have been asked to extend short-term loans to enterprises short of working capital, he said.

The government will crack down on speculators who drag down share prices by betting on the market's decline, and will use its national stability fund to invest in the market if necessary, he said.