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SCMP Reporter

A COMBINATION of bargain-hunting and optimism over the start of the eighth round of Sino-British talks pushed the Hang Seng Index up 33.09 points to 6,846.81 in moderate trading of $2.76 billion.

  The rebound ended three days of losses but the index remained below 6,800 for a second day. The index was last this low 10 weeks ago.

  It lost ground in morning trading after an initial upsurge from Monday's 6,813.72 close, to 6,838.09 by 10.15 am.

  A low of 6,767.69 was struck in the morning session as overseas buyers reportedly off-loaded blue chips in what was described as portfolio-shaving by institutions.

  A recovery began in the middle of the morning, enabling the index to close at 6,816.12 at lunch.

   Local bargain-hunters moved in during the afternoon session, taking the index to its 6,846.81 close, with the day's high of 6,856.58 reached just before the end of trade.

     The finance sub-index was flat, utilities were up 1.88 per cent, property developers up 0.7 per cent and conglomerates up 0.17 per cent.

   The flight to utilities seemed to indicate increasing caution among investors.

  SBCI Derivatives' James Vinall said institutional option-trading indicated there would be little change in the level of the index.

  Trading focused on spreads limiting downside below 6,800 while not making any money at all above 7,000.

   Increasing selling of options indicated that the expectation was for a stagnant market between 6,600 to 7,000.

  The most heavily traded stock was Hutchison Whampoa, down 20 cents to $19.60 on a turnover of $178.43 million.

  Sun Hung Kai Properties was also a casualty of blue-chip selling early in the day, but bargain-hunting pulled the stock up 25 cents to $36 on a turnover of $144.54 million.

  Laggard Jardine Matheson Holdings was up strongly by 50 cents, to $54.50, in relatively heavy trading of $65.91 million.

   Attention focused on the Peregrine 1995 warrants, which rose 14.5 per cent to $150 in their second day of trading, leaving them at an expensive-looking premium of 37 per cent. The warrant turnover was $23.4 million.

  Lehman Brothers was cited as a big seller of Wharf Holdings yesterday.

   The lack of liquidity in the stock meant that the heavy selling damaged the price.

   It was down 40 cents to $18.90, its lowest level since mid-April.

  A broker with an American firm said Lehman had been a seller of the stock for a number of days; this had formed part of a general trend of mild selling by institutions of baskets of Hang Seng Index stocks across the board.

  Another target for bargain-hunters was Hongkong Telecom, up 30 cents to $10.50 on a moderate turnover of $38.4 million.

  TVB, in contrast, fell 50 cents to $20.20 in relatively strong profit-taking by institutions. Swire Pacific was down 25 cents to $37.

  Among the second and third-liners, Uniworld was the most actively traded by share turnover, with 56 million changing hands.

   The stock remained unchanged at 4.8 cents.

   Mandarin Dragon was up one cent to $1.60, with 27.8 million shares changing hands.

  Hongkong futures remained above 6,900, at a premium of around 56 points, in turnover of 6,996 on the July contract.

   The August future closed at the same level after 1,131 contracts were traded.

  At the current level, the index is selling at 11 times prospective 1993 earnings and 9.25 times 1994.

   The yield is around 3.9 per cent, compared to the 3.39 per cent available on the interbank market.



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