The Hong Kong share market fell 1.36 per cent on profit-taking yesterday as investors discounted a widely expected cut in United States interest rates. The Hang Seng Index lost 108.43 points to 7,837.61 after a sharp rise on Monday. The US Federal Reserve was due to meet yesterday to decide whether to cut a key interest rate that could lead to an easing of lending rates in Hong Kong. 'The possibility of a rate cut . . . has already been discounted in share prices,' Dharmala Securities head of research Ben Kwong Man-bun said. 'With the long holiday approaching, investors prefer to take profit.' Turnover was a quiet $4.42 billion even as index futures and options contracts expired for September. That compares with a record $79 billion in turnover as the Government faced off against speculators when August futures expired on August 28. Officials said they had not been in the market since then. Some brokers agreed. 'I don't think they're in October futures at all,' a trader said. Another trader said he suspected the Government might have small positions to hedge against its massive holdings in blue chips, but that both the Government and big hedge funds were out of the futures market. The bulk of outstanding contracts for October was held by arbitrageurs and investors hedging their options and blue-chip holdings, he said. 'I would estimate today we'll see about 65,000 open interest [contracts] - it just shows you a lot more people than hedge-fund speculators use this market,' he said. In the few months before the government intervention, open interest had often hovered around the 100,000-contract level. Brokers said there were fewer outstanding contracts now because speculators and index arbitrageurs - who now have more trouble borrowing stocks - had been forced to reduce their positions. They complained that some of those who used the market for risk-management purposes had also been chased out. September futures expired yesterday at a premium, while October futures closed at 7,680 points, a 157.61-point discount to the cash market. H shares and red chips, both hit for a second day, fell more than 3 per cent as brokers feared a clampdown on foreign exchange holdings would hurt liquidity in mainland-related shares. The mainland central bank has ordered domestic firms involved in foreign trade and overseas-listed companies to repatriate foreign exchange holdings by tomorrow. This comes as many exporters and other firms were thought to be hoarding their foreign currency earnings to hedge against a yuan devaluation.