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SCMP Reporter

THE Hang Seng Index posted a second consecutive decline for the first time in four weeks with a 25.72-point drop to 7,372.19.

  Turnover was a modest $4.42 billion as many investors from the United States and Britain were not active because of public holidays.

  The index's decline, which was sparked by profit-taking, was mainly due to falls in Hongkong Telecom and HSBC Holdings.

  Hongkong Telecom took 19.34 points off the index with a 30-cent dip to $11.40, while HSBC wiped off 7.2 points with a 50-cent fall to $74.

  Profit-taking dominated early morning trading with the index falling 53.6 points to an intra-day low of 7,344.31 before recovering to 7,368.94 by lunchtime.

  In the afternoon session the index climbed above 7,400. However, it retreated to below Friday's close after investors reacted to late rumours that the airport talks, scheduled to start on Friday, might be delayed.

  The index's weaker performance seemed to coincide with brokers' views that the market needed a breather, after jumping 227.95 points or 3.17 per cent last week.

  ''I think you'll see a downward spiral over the next couple of days,'' said Morgan Grenfell institutional broker Stuart Gregory.

   ''The market has gone up too much, too fast and there's a lack of any news.''   Salomon Brothers managing director William Phillips said the market's main theme was its reluctance to undergo a large correction despite the huge gains during the past six weeks.

  ''The market doesn't seem to want to come off,'' he said. ''Every time it comes off, buyers step in.''   A particularly odd development yesterday was that the four heaviest-traded stocks were second-line counters.

  Asia Securities, the subject of a takeover battle between Lippo Group and Chinachem, was the most active with turnover of $200.2 million. The stock closed up one cent at $1.92, six cents below Chinachem's offer.

  China Petrochemical's announcement that it had bought a 10 per cent stake in Asia Standard for $2.10 a share attracted a lot of investors who jumped on the bandwagon as turnover hit $197.1 million.

  Asia Orient said it accounted for turnover of $66.75 million with the purchase of 30 million shares to raise its stake in Asia Standard to 52.3 per cent from 47.4 per cent.

  The stock climbed 6.9 per cent or 15 cents to $2.30.

  Paragon Holdings and Chesterfield, which have been rumoured to be takeover targets of mainland enterprises, had turnover of $144 million and $133.1 million, respectively.

  Paragon dipped four cents to 62 cents while Chesterfield, which issued a statement saying it did not know of any reason for the recent increase in the price and volume of its shares, was up seven cents to $1.10.

  Among the heavily traded blue-chip stocks, Cheung Kong was up 40 cents to $28.40 while Hutchison gained 10 cents to $22.40.

  Mr Phillips said Cheung Kong and Hutchison had underperformed the market during the past two years despite strong runs recently and had quite a bit of upside potential.

  Sun Hung Kai Research director Percy Au-young remained optimistic about the market because he thought many investors were waiting for even more positive news from the airport talks and the fifth round of Sino-British talks in Beijing from June 14 to 16.

      Mr Au-young said the index should trade between 7,200 and 7,500 during the next one to two weeks before it began to move up again.



Falls by two major stocks depress index