STOCKS closed higher in cautious trading yesterday with the market waiting to see if Hong Kong will follow the US in cutting interest rates. The Hang Seng Index closed 29.75 points up at 9,907.61, a gain of 0.30 per cent. Turnover was modest at $3.40 billion, down from the revised $3.69 billion for Wednesday. Volume was steady with 1.11 billion shares changing hands. Dharmala Securities research director Ben Kwong said: 'The market is moving in a very narrow range. Some people believe there will still be a rate cut in Hong Kong.' The US Federal Reserve trimmed short term interest rates by 25 basis points on Tuesday, helping Wall Street and other regional markets to make solid gains. Wall Street corrected overnight but the Hong Kong market continued to advance as investors anticipated a similar cut in rates when the Hong Kong Association of Banks meets on Friday. Trading was split in two levels yesterday with the larger companies boosting the index but a number of smaller stocks falling spectacularly. SAS Dragon, a trading and retailing company, fell as much as 51.79 per cent in early trade amid a raft of unfavourable rumours. It closed 42.56 per cent down at $1.68, bringing down a number of other speculative stocks down with it. The index opened with a fall, dropping from the previous close of 9,877.86 to the day's low of 9,838.73 after five minutes of trading. It spiked upward on local buying to reach the day's high of 9,928.41 just after 11am. The index then drifted lower to reach the morning close at 9,891.73, an intra-day gain of 13.87 points. The afternoon was subdued with the index gaining at the close. Among the 33 blue chips, 12 rose, four closed unchanged and 17 lost value. Conglomerates and properties led the market up as investors headed for the larger stocks. The Hang Seng commercial and industrial sub-index, which includes conglomerates, gained 37.16 points to 7,428.17. Hutchison Whampoa led the market in net gain, adding 80 cents to $45.60, buoyed by continuing speculation it is about to launch its telecom division Orange. Fellow conglomerate Swire Pacific rose 25 cents to $60. The Hang Seng property sub-index added 81.77 points to 17,140.63, as property counters continue to benefit from the success of Tuesday's Government land auction. Sun Hung Kai Properties rose 75 cents to $61.75, Cheung Kong added 20 cents to $45.30 and Henderson Land Development climbed 10 cents to $46.50. Banks were mixed with the Hang Seng finance sub-index edging up 14.77 points to 9,742.32. Index giant HSBC rose 50 cents to $115.50 in the day's highest turnover of $316.45 million, Hang Seng Bank fell 25 cents to $68.75 and Bank of East Asia lost 15 cents to $27.70. Utilities were lower, dragged down by the poor performance of the electricity companies. The Hang Seng utilities sub-index lost 5.97 points to 9,873.15. China Light & Power dropped 50 cents to $34.80 and Hongkong Electric fell 15 cents to $24.80 as investors headed out of the stocks after a number of warnings that profit growth for the companies was slowing. Other utilities fared better. Hongkong Telecom rose 10 cents to $13.65 and Hongkong and China Gas closed unchanged at $12.60. Second and third line counters took some punishment with several making dramatic falls. SAS Dragon fell victim to financial speculation, triggering a wave of selling on the stock. Once the selling started it snowballed. Seapower Securities research director Samuel Ho said: 'The phenomenon of SAS Dragon is making people worried about other speculative stocks.' Daiwa Associate fell 19.12 per cent to $1.12, Yeebo (International) dropped 16.03 per cent to 89 cents and Ngai Hing Hong lost 13.97 per cent to $4. The directors of SAS Dragon, Daiwa Associate and Ngai Hing Hong all put out announcements through the stock exchange stating they did not know why the shares had fallen so much. New listing Founder (Hong Kong) performed poorly on its first day of trading, closing 5.05 per cent below its issue price. The stock reached a high of $2.05 before closing at $1.88. Analysts said the software publisher was dragged down by the negative sentiment induced by the disastrous debut of China Apollo on Tuesday.