The main TAIEX share index ended up 15.91 points at 6,034.60, while turnover fell to T$73.26 billion from T$93.72 billion on Wednesday.
"The buying by foreign investors was a sign that they believed the worst of the tech slump is over and are increasing holdings before the MSCI upgrade," said Chiang Chen-sheng, manager at MasterLink Investment Advisory.
The index could test 6,200 points after the holiday, he said.
The electronics sub-index recouped earlier losses to finish up 0.24 percent as AU, the world's third-largest maker of computer displays, jumped 1.66 percent to T$49.00 on hopes that prices of liquid crystal displays (LCDs) will hit bottom soon.
Rival Chi Mei Optoelectronics Corp, the island's number-two LCD maker, rose 2.90 percent to T$46.10 and Chunghwa Picture Tubes Ltd was up 2.14 percent at T$14.35.
But United Microelectronics Corp (UMC), the world's second largest top contract chipmaker, fell 2.39 percent to T$20.40, after recent gains.
Morgan Stanley Capital International's (MSCI) Taiwan weighting will rise to 100 percent by the end of May 2005 from the current 75 percent, a move that will trigger another round of foreign investment inflows.
According to Nomura Securities, over the past five years, Taiwan stocks have gained an average of 3.6 percent in the last five trading days before the Lunar holidays as foreign investors pile into the market.
In the six trading days before Thursday, foreigner investors bought a net T$41.8 billion in Taiwan stocks.
Chang Hwa Bank was another bright spot, rising 1.87 percent to T$21.80, helping the financial sector, second only to techs in Taiwan weighting, 0.45 percent higher.
The over-the-counter market's TAISDAQ index closed up 0.24 percent at 112.12, and February TAIEX futures rose 0.37 percent to end at 6,045.