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SCMP Reporter

A HEALTHY round of profit-taking knocked 78.5 points off the Hang Seng Index yesterday, following a 214.35-point rise earlier this week.

  However, brokers expect the market to sharply rebound today, following China and Britain's announcement after the market closed that the Joint Liaison Group would meet at the end of this month for the first time since December.

  The Hang Seng Index closed at 7,260.58. Turnover was $3.77 million with the 33 blue-chip counters accounting for only 31 per cent of the total.

  ''We've been saying this is a trading market and it's had a very good run for the last few days,'' said Schroder Securities director of regional research Nick Peacock.

  ''People are naturally taking profits ahead of a long weekend.''   The index started the day on a sour note, dropping 42.15 points by 10.15 am, and it gradually edged down through the day.

  Trading of the June index futures contract, however, was far more volatile. It tumbled 50 points to 7,268 to close at a 7.42-point premium to the cash market.

  After climbing to 7,340 in early morning trading, the contract tumbled 80 points in less than 45 minutes.

  It recovered to 7,325 in the afternoon but lost 57 points before the close.

  Miramar Hotel and Investment was the most heavily traded stock with turnover of $138.6 million, after CITIC Pacific and Cheung Kong announced a takeover bid on Wednesday. The stock jumped $1.20 or 8.1 per cent to $16.

  Lolliman Holdings also saw heavy turnover of $126.2 million, following an announcement by Continental Mariner that it was interested in acquiring Emperor International's controlling stake in Lolliman.

    Lolliman, a property and investment company with a 33 per cent stake in Hongkong Daily News, posted the day's biggest jump, climbing 26.4 per cent or 18 cents to 86 cents.

  Investors' fascination with toy makers, which saw Herald and Harbour Ring jump this week, turned to Applied International. The stock was up 10 cents to $5.50 on turnover of $108.5 million.

  Golden Hill made a rare appearance among the most heavily traded, with turnover of $58.9 million.

  The stock fell three cents to 55 cents after the company issued a statement that informal discussions with an unidentified party about the acquisition of a controlling stake in Golden Hill had been discontinued.

  Among the heavily traded blue-chip stocks, Hutchison dipped 50 cents to $21.70 following a 6.2 per cent rise this week.

  Jardine Matheson fell $2 to $60, the strike price of a two-year covered warrant issue announced by Peregrine on Wednesday.

  A large chunk of the index's decline was due to Hongkong Telecom, Hutchison Whampoa and China Light & Power, which combined for a little less than half the fall.

  Hongkong Telecom was down 30 cents to $11, largely due to an adjustment for the dividend of 23.1 cents, while China Light dropped $1 to $39.25.

  A recurring theme in the market has been concern about liquidity because of the large number of fund-raising exercises expected during the next couple of months.

  Wing Hang Bank and Chase Manhattan have indicated they will rise $1 billion while Henderson Land plans to raise $4 billion by floating its Chinese property business.

  However, there were divergent views on whether the market would be able to digest the offerings.

  Baring Securities assistant director James Slade said the large amount of dividends that would be reinvested in the market would mean there would be no problems.

  ''We'd need several very heavy issues to have liquidity in the market tighten up,'' he said.

  Mr Peacock, however, said some large issues could have a serious impact on liquidity, which had been the driving force behind the index's rapid rise this year.



Rally likely on JLG news