THE local stock market plunged more than 340 points to well below the 8,000 level on the first trading day of the new year. Stricken and cautious investors all stayed on the sell side yesterday, driven by a possible Sino-American trade war. Under the selling spree, the Hang Seng Index plummeted 4.24 per cent, or 346.9 points, to 7,844.14, while turnover was fairly thin at $1.94 billion. Brokers said no one had the courage to buy amid the cautious market sentiment, caused by fears of further interest rate rises and deteriorating trade situation between China and the United States. Affected by the bad news, the market opened lower and crashed through 8,000 to 7,940.14 before the morning close. Gary Wong, institutional sales director at Yamaichi, said heavy futures-related selling had led the plunge. Big brokerages including Jardine Fleming, Morgan Stanley and Lehman Brothers all remained on the sell side. But Mr Wong said the trade war anxiety was an excuse because the dispute had been going on a long time. The main reason was a lack of buying interest. 'No one is willing to buy stocks,' he said. Brokers said sentiment became more negative and nervous when the index crashed through 8,000, sparking cut-loss orders. A broker at a Japanese firm said: 'Fund managers and investors dare not take the risk of bargain-hunting at this moment. And no one will buy aggressively.' The market expects that the return of recently active Japanese buyers today may help to recover some losses. Brokers said that until uncertainties over interest rates and Sino-US trade relations were cleared, the market would remain bearish. However, they did not expect another plunge as great as yesterday's. Mr Wong predicted both the upside and downside to be limited, and the trading range to stay between 7,500 and 8,500. Brokers expect bargain-hunting if the index falls to 7,500. In the negative trading climate, all 33 blue chips failed to escape the falling trend. The Hang Seng constituents still held most interest, accounting for 77.93 per cent of the volume. Five blue chips were among the 10 heaviest traded. They were largely property stocks, including Hongkong Land, Hopewell, Hang Lung Development, Cheung Kong and utilities counter Hongkong Telecom. The property sector was hardest hit, with the sub-index plunging 4.57 per cent to close 617.63 points down at 12,905.81 points. Among them, Hongkong Land lost heavily - almost seven per cent or $1.05 to $14.05. The counter was heavily traded with 7.69 million shares changing hands worth $110.73 million. Property giants Sun Hung Kai Properties (SHKP) and Cheung Kong also suffered. SHKP dipped $2.4 to $43.80 on turnover worth $99.81 million, while Cheung Kong shed $1.50 to $30 on turnover worth $122.09 million. Heavy trading sent Hongkong Telecom down 45 cents to $14.30, with 8.1 million shares traded worth $116.87 million. Banking stocks also fared badly, with Hang Seng Bank falling five per cent or $2.75 to $52.75 on turnover of $89.26 million. HSBC reported a drop of $2.5, or three per cent, to $81 on $321.19 million turnover.