Hong Kong investors took to the sidelines yesterday, ahead of today's presidential election in Taiwan, with the Hang Seng Index drifting lower by the end of trade. Late profit-taking overpowered buying of laggards, erasing all early gains and dragging the Hang Seng Index a notch lower. There was some interest in second and third-line stocks. Brokers said most investors, who had been focusing less on the China-Taiwan military tension this week, had taken a harder look at the situation and decided to retreat a little until the election was over. Many traders also remained sidelined ahead of next week's US Federal Reserve meeting, when the policy committee will make a decision on whether to cut US interest rates. Although few people were expecting a cut, investors would rather close out their positions ahead of the weekend. A broker said: 'The buying was very selective, and a lot of attention was on the laggards. But sentiment has turned a little cautious.' The Hang Seng Index shed 1.23 points yesterday to end at 11,026.73. Turnover fell to a moderate $4.39 billion, from $5.88 billion on Thursday. The March futures contract also closed marginally lower, down five points to 10,970, at a 56.73-point discount to the underlying cash market. In London, the Hang Seng London Reference Index was 7.55 points higher at 11,034.28 in early trade. A broker in Hong Kong said: 'Earlier this week, we saw people buying on the land auction results, but today they decided to take profit, because of the Taiwan tension.' But there were many investors who did not want to sell, so they switched around, causing most of the blue chips to close mixed. HSBC ended $1.50 higher at $119, while Hang Seng Bank closed 75 cents lower at $79.25. Henderson Land shed 25 cents to $55.50, as investors switched out of the stock to cheaper property companies such as New World Development, which rose 70 cents to close at $37.10. The initial public offering of 69.8 million shares in Henderson China Holdings, subsidiary of Henderson Land, closed yesterday. The parent company declined to disclose if it was fully subscribed. Brokers said most retail investors found the offer price of $21.50 expensive and had expressed less enthusiasm than overseas investors. Ben Kwong, research manager of Dharmala Securities, said: 'Overall, the market has improved. If there is no crisis next week, the market may test higher levels.' The market was also expected to trend higher on a spate of results to be released next week by property companies, traders said.