CONFUSION over the talks planned between Britain and China was one factor behind yesterday's falling prices which saw the Hang Seng index drop 20.65 points. With volume down to $3.3 billion, the one bright spot was the performance of HSBC Holdings. HSBC Holdings closed at $69, its highest level ever, apparently because some analysts are recommending clients to switch out of Hang Seng Bank after its remarkable price rise of the last four months. Cheung Kong filed a notice with the exchange saying it had taken up 25.5 million shares in Pioneer Industries, which added five cents to $4.50. Governor Chris Patten's remarks to the Legislative Council had boosted prices on Friday, despite his vagueness about when or if talks would begin. However, Mr Michael Ng Wai-ming, assistant director at Sassoon Securities, said that ''today the market used them as an excuse to come off''. The index slid below 6,450 in early trade, as Friday's record close of 6,502.81 brought out profit-takers. However, investors looking to the long term, including those from overseas, provided a floor and prices were soon up again. The day's low of 6,433.21 was reached around 11 am and then prices moved up slowly but steadily. At the lunch close, the index was at 6,462.34, down 40.47 from Friday's close. In the afternoon, buying gathered pace and the index put on some 20 points during the hour. Trade for the day was $3.3 billion, $1.59 billion down from Friday's corrected figure. On the futures exchange, trade fell even more sharply, with volume at less than half Friday's level. The March contract closed at 6,487, down 38 and five above the cash index. The June contract closed at 6,478, a decline of 22. The rise in HSBC Holdings was achieved on turnover of $225.3 million, the day's highest. Of the 33 index stocks, 13 were unchanged or down a spread, the minimum amount a share price can change, and most of the rest were down two spreads. Cheung Kong, the best performing property stock last week, was steady at $23.50. Moving against the trend was Kowloon Motor Bus, a relatively thinly traded stock, which rose 3.1 per cent to $10.10, up 30 cents. Heading down was Hongkong Electric, which dropped 2.4 per cent to $17.30, a dip of 40 cents. The stock had been one of the best performers last week. Much of the activity was in second and third-line stocks, which were given little attention during last week. The increased volume created some dramatic price movements. Paladin rose 25.4 per cent to $1.58, up 32 cents. Applied International gained 20.3 per cent to $1.54, up 26 cents. Golden Hill rose as high as 19.1 cents from Friday's close of 15.3 cents. The company posted an announcement with the exchange saying it knew of no reason for the increase. The shares settled down to 19 cents, which still represented a rise of 3.7 cents on the day. Joyce Boutique gained 9.8 per cent to 67 cents, up six cents. A number of analysts have been tipping the stock as a beneficiary of increased consumer spending after the Budget. The Robert Fleming call warrants in Cheung Kong started trade, closing at $7.05 on lively trade of $51.8 million. First Pacific was the worst-performing share of the day, falling 6.6 per cent to $1.55, down 11 cents. The company declared a 5.5 cent final dividend. Also down was C.P Pokphand, often cited as a company that will be hard-hit by any further devaluation of the yuan. The shares fell five per cent to $2.875, a decrease of 15 cents.