Taipei - Taiwan stocks skyrocketed Thursday, closing 6.74 per cent higher in their biggest percentage rise in 18 years on the bullish outlook over upcoming Chinese investment on the island, dealers said.

The main Taiex stock index advanced 378.51 points to 5,992.57 with foreign institutional investors buying 32.99 billion Taiwan dollars (996 million US dollars) of shares on the hopes of further gains, dealers said.

They said local stocks opened with a bang after the government said late Wednesday that it would allow institutional investors from China to invest in the island's stock market for the first time since the two sides split at the end of a civil war in 1949. The measure would become effective next week.

The island's government also said it would announce regulations by the end of next month on other Chinese investment in Taiwan businesses, a move seen as likely to boost the island's sagging economy.

On Wednesday, China had announced that it would allow its firms to invest in Taiwan from May 1.

Dealers said the state-owned China Mobile's agreement Wednesday to buy 12 per cent of Taiwan's Far EasTone Telecommunication for 17.8 billion Taiwan dollars also bolstered the market sentiment.