WHEN in doubt, look at the long bond. This was the guiding principle for the Hang Seng Index this week. Tugged back and forth between expectations of a slowing economy, interest rate drops in the United States and continuing bearish local indicators, the Hong Kong exchange jumped around like a frolicsome puppy on Wall Street's lead. The US bond market was greatly impressed by the latest government economic figures, rising sharply after seeing clearer signs of an economic slowdown and the resulting potential for early interest rate cuts. Ever-optimistic, the Hang Seng followed along and on Wednesday came back to life. The irony is that one of the key reasons for the exchange's poor showing over the previous period had been that expected interest rate cuts suddenly seemed less likely to materialise. We are clutching at the liquidity straw and fundamentals are long forgotten. In what is hard to see as anything other than selling off the family silver to get through the lean times, companies such as Cheung Kong (Holdings) have been cashing in their own holdings to replace the property dollars missing from their corporate bank accounts. Does the sale of 1,000-odd units at Kingswood Villas herald the first light of a new dawn after the long cold night of the local investment property market, as some analysts are suggesting? Li Ka-shing does not seem to think so. Some of the speculation about his motives suggests that he is a trader at heart and is just taking some much needed profit from his portfolio. But if we look at this as merely a trading play, it of course infers that Mr Li expects the price of Hutchison Whampoa shares to go down. On the other hand, we never underestimate the corporate juggling powers of Mr Li and would not sell Hutchison or Cheung Kong today. In fact, we recommend buying Cheung Kong on any weakness, as its 1995 earnings now look well-secured. During April, directors with listed companies in Hong Kong sold about $15 million of their own shares. But last month this figure rose to about $140 million. Selling one's own shares is not automatically a bearish indicator. Much more telling is the decline in directors' purchases or company buy-backs of their own shares, which showed a very marked contrast when comparing January and June ($531 million against $50 million). If firms have a pessimistic view of their own shares, what should the outside investor think? We have to conclude that this is another brick in the wall of worry for investors. In our portfolio we make no changes other than to raise some cash by selective profit-taking.