Taipei - Taiwan stocks dropped nearly 6 per cent in mid-morning trading Tuesday, due to Wall Street falls caused by the US Congress failing to to pass the 700-billion-US-dollar bank rescue package.

The Taiwan stock market dropped 400 points after opening at 9 am, despite Taiwan government unveiling an emergency plan to stabilize the bourse earlier on Tuesday.

Two hours into the session, the TAIEX had fallen 324.81 points, or 5.48 per cent, to 5,604.82 points.

President Ma Ying-jeou on Tuesday instructed the cabinet to do all it could to stabilize the financial market in the aftermath of the rejection of the Wall Street bail-out bill.

Taiwan's financial regulator announced to tighten its rules on short-selling, effective as of Tuesday in an effort to keep the market from sliding even further. (dpa)