THE Hang Seng Index bounced back from a 70-point fall in the first few minutes of trade yesterday, ending 28.5 points higher on continuing hopes of a breakthrough in Sino-British relations. The early morning dip was sparked by a switch in sentiment towards Hongkong Telecom in New York overnight. It was fuelled by selling by investors who feared the gazetting of Governor Chris Patten's election proposals, which would be seen as a sign of a hardening in Sino-British relations. But widespread speculation about the afternoon session in the Legislative Council switched the mood, as those believing they had hot inside information bought shares. The index closed at 6,177.69 on turnover of $2.78 billion, $33 million down from Tuesday. ''The market went up a lot . . . I think some people already knew that the Hongkong Government was going to postpone the gazetting of Chris Patten's proposals,'' said the dealing manager of a leading brokerage. One senior manager with a major international equities house said the market ''continued to be rumour-driven'' which made ''prediction very difficult''. Mandarin Oriental was the best performing stock in the Hang Seng Index, with dealers citing the latest Hang Seng Economic Monthly, which painted a rosy picture of the territory's tourist trade in coming years. The downgrading of Hongkong Telecom in New York initially affected the company's American Depository Receipts overnight, and the knock-on effect hit the shares during Hongkong trade, knocking 1.5 per cent off the share price. China Light and Power rose 2.1 per cent in advance of the warrant issue by Robert Fleming. Another utility that rose was Hongkong and China Gas, up 3.1 per cent. Recently listed car manufacturer Denway Investment changed out of reverse gear, rising 15 cents or 7.3 per cent to $2.20 after falling 15 cents on Tuesday. Trade in Denway continued to be brisk, with turnover of $49.4 million. IHD Holdings and China Strategic were both suspended pending announcements. After a few minutes of trade the index had fallen to 6,078.55 compared with Tuesday's close of 6,149.19. Sentiment switched and it headed back up, recovering to 6,112.14 by 10.45 am. The rise continued to the end of the morning and into the afternoon, the index passing Tuesday's close at about noon and continuing past 6,200 near the end of trade. It fell slightly towards the close. Trade continued to be busy in the futures market, with turnover of 11,323 contracts. The February contract, which closes for trade today, ended at 6,205, a premium of 56 points to the cash index. Mandarin Oriental rose 45 cents or 5.8 per cent to $8.25. The stock has made some sharp jumps during recent months. Turnover was $4.03 million. The two-way pull in utilities left the utilities sub-index little changed, down 5.12 points at 7,379.44. Hongkong Telecom closed down 15 cents or 1.5 per cent at $9.85, although it fell to a low of $9.65 in early trade. China Light and Power rose 75 cents to $36. Hongkong and China Gas announced 1992 after-tax profits up 20.2 per cent during lunch. The shares rose 50 cents or three per cent to $16.80. The result was at the low end of analysts' forecasts, but shareholders got a bonus in the form of a one-for-five share issue. Property shares had a broad-based rise, pulling the property index up 116.35 points to 9,737.51, the largest rise in the sub-indices. Burwill Industries had the day's second-highest rise, gaining 10 cents or 9.7 per cent to $1.13. After the market closed it announced a restructuring of its Xun Xiang scrap metal joint venture.