THE Hang Seng Index hit yet another record yesterday on reaction to a strong market for Hongkong stocks in London and a report that China and Britain had reached an informal agreement on granting company franchises that would go beyond 1997. The index closed 51 points higher at 7,169.96 after reaching an intra-day high of 7,233.35 only 30 minutes after the market opened. Turnover was $4.55 billion. The index has now jumped 31.8 per cent since the beginning of the year and is trading at a prospective 1993 price-earnings ratio of 12.3. Brokers commented that causes of index movements over this period had been mainly political in nature. ''China and Britain have been playing a poker game and it's been the encouraging statements or concessions from China that have seen the market leap tonew highs,'' said a broker with a United Kingdom-based brokerage. Yesterday the May futures index gained five points to 7,175, finishing at a slight premium to the cash market. Barclays de Zoete Wedd sales manager Nial Gooding said local investors had simply reacted to the prices set in London on Thursday night. ''Hongkong has not had an input on today's price level,'' he said. ''They underlined the level foreigners took it to last night.'' Mr Gooding said the investment community was now split into two camps: those nervous about the market's future direction and those who were extremely bullish. Among the most bullish investment houses is Peregrine, which believes the index could easily hit 10,000 points within 12 to 18 months based on earnings momentum and the resolution of all political and economic issues. ''I don't think it's unreasonable to suggest this, given the re-rating not just in Hongkong but in the region and given the increasing flow of money coming in,'' said Peregrine director Chris Malpass. Despite positive statements by British and Chinese officials, Mr Gooding said many investors were still worried that something nasty might happen during this weekend's talks in Beijing, so there was an unwillingness to establish fresh positions. ''Peopleare flattening positions,'' he said. ''Traders who are short to accounts outside were buying shares back.'' After prices climbed in London, the index immediately reacted with a 114.39 point jump to 7,233.35. However, the market was unable to sustain the first foray above 7,200, and it quickly lost ground to 7,187.72 at lunchtime. The afternoon trading session was marked by pre-weekend profit-taking, with a further 17.76 points knocked off the index. Jardine Fleming director W.K. Wan said the correction had been expected, because short-term traders had sold shares to guard against possible bad news this weekend from the talks. Hutchison Whampoa continued its reign as the most heavily traded stock, with turnover of $365.9 million. The stock climbed 60 cents, 2.9 per cent, to a record $20.80. Brokers said most of the buying was based on rumours in London that Hutchison had sold its UK telecommunications business. ''It is up for sale - it's a question of will they find a buyer,'' a broker said. Wharf Holdings climbed 20 cents to $20.70 after China endorsed the launch of Hongkong's cable television network. The 12-year franchise required China's approval because it straddles the 1997 handover. China's approval of a 15-year extension to Hongkong Electric's licence, which expires at the end of this year, at an informal Joint Liaison Group meeting helped the company's stock gain 30 cents to $18.60. Jardine Matheson continued to edge closer to its record high of $65.50 by adding another 50 cents to close at $59. Jardine Strategic was unchanged at $25.60 while Dairy Farm fell 30 cents to $12.60. Among the biggest losers was Asean Resources, which fell 20 cents, 6.8 per cent, to $2.725 after negotiations fell through with Guangdong International Trust and Investment Corp. Wing Hung Kee was also caught in the clampdown on backdoor listings. It fell six cents, 8.6 per cent, to 63 cents. National Mutual climbed 7.4 per cent, 27.5 cents, to $3.975 after the company's announcement on Thursday that interim profits had jumped 21.7 per cent to $237 million.