WHAT are the odds now on the Hang Seng Index hitting 8,000 in the near term? Long indeed, after a week in which the market barometer tumbled another 175 points to finish Friday at 6,750.33. The Hang Seng Index of blue chips has fallen 697 points or 9.36 per cent from its record closing price of 7,447.24 on May 27. Red chips have taken the brunt of selling pressure with Dao Heng's Red-Chip Index down 16.6 per cent from its high point. Earlier in the summer, with the market leaping ahead almost 100 points every day, it seemed only a matter of a week or two before the 8,000 prediction of Hongkong and Macau Affairs Office head Lu Ping proved correct. Mr Lu's reputation as a market forecaster is saved by the caveat that his 8,000 target depended on Sino-British talks being successful. Since then the talks on Governor Chris Patten's reform proposals have been through more rounds than most boxing bouts, with still no end in sight. The ninth round opens mid-August. Coincidentally, after Mr Lu's forecast, the index stood at exactly the same level as today. The difference is then the market was responding only to positive signals; today, it is negative news that drives the index. Well-informed analysts see 6,600 as the crucial support level for the index, barring dramatic circumstances, such as the long-rumoured death of China's paramount leader Deng Xiaoping. As this column has previously pointed out, the previous heady optimism was overdone. Investors were ignoring the mounting bad news on China's economy and seeing only the good. When all opinions point one way, as they did in April and May, it's a sure sign that something is wrong. But after the heavy falls of the past few weeks, is the pessimism now overdone, and is it now the time for small investors to rush back in? Probably not, though there is room for some selective buying of blue chips. Nomura calculations put Hongkong at a price/earnings ratio of 11.3 at 1993 earnings and 9.7 at 1994 earnings forecasts, making Hongkong the cheapest major market in the world and certainly a place to invest for the long term. But the ''August factor'' means that, unusually, investors have a few weeks to ponder their decision on whether to go back in. August is the month of the big sleep; it's the traditional holiday month for fund managers both here and overseas. Turnover slumped to a daily average of $2.6 billion last week, half the level seen in early summer, as the market began to doze off. This year, uncertainty over China's economic course led to many overseas institutions cutting back their holdings in the Hongkong market ahead of the holiday season. They are unlikely to change their outlook anytime soon.