PREJUDICE against the handicapped would drop if ordinary people had more opportunities to mingle with them. Providing the opportunity was one of the aims of a community project, Harmony '93, organised by the St Louis Youth Club and St Paul's Secondary School's Social Services Society. The project, begun last December, included game days, a variety show and visits to hostels for the mentally retarded and physical handicapped. ''Through these activities students got to understand the needs and problems of the mentally retarded,'' said Andrew Au of St Louis School. ''Any fear or discrimination against the mentally retarded stems from misunderstanding, and this can be reduced.'' Loretta Yip of St Paul's said she felt a strong sympathy for physical handicapped children. ''They cannot run and play around like normal children, but some of them are very talented and artistic,'' Loretta said. In a variety show, the last activity of Harmony 93', some mentally handicapped children came up with a delightful surprise. Four children of Rhenish Church Grace School performed a modern dance and sang to entertain the audience. ''Through artistic activities, mentally handicapped children can build up their self-esteem and gain confidence in communicating with others,'' said a social worker from Rhenish Church Grace School. She said the performance was also a joy and comfort for the parents of the mentally handicapped. ''You can imagine how the parents must feel when they watch their children perform on stage. They see that their children can perform like normal children with proper guidance and training,'' the social worker said. Also taking part in the show were some 30 elderly people from two community groups. They sang Jacky Cheung and Hacken Lee hits and performed a dragon dance. The three-hour-show, held recently at Caritas Hongkong on Caine Road, also featured a magic show, a bamboo dance from the Philippines and a revue of songs performed by students of Hongkong University and St Louis School.