STRONG buying by foreign institutions and speculation that tycoon Li Ka-shing was buying the market saw the Hang Seng Index jump 89.03 points to 6,988.96 yesterday. Turnover was $2.78 billion, with blue-chip counters accounting for a large chunk of the action. HSBC Holdings was the most actively traded with turnover of $187.7 million. August index futures rose 116 points to 6,972 to close at a 17-point discount to the cash market. Kleinwort Benson assistant director Tony Edwards said many investors believed the market was cheap, given that it was trading at a price-earnings multiple of 10 based on 1994 earnings. ''Clearly, institutions that were under-weight in Hong Kong have felt in this bounce fairly squeezed and have removed over-the-counter hedges and are buying more stock,'' he said. ''I think we have also seen local investors continuing to come into this market.'' Peregrine sales director Chris Malpass said foreign institutions had been active, but were selective about picking up blue-chips. ''Some funds are prepared to make long-term bets rather than try to anticipate very short-term movements,'' he said. ''To some extent, it is long-term pension money coming into the market and taking advantage of further falls.'' The popular choices, Mr Malpass said, were the banks, Sun Hung Kai Properties, Swire Pacific and China Light and Power. HSBC and Hang Seng Bank were unchanged at $74 and $58.50 respectively. China Light jumped $1.50, 3.9 per cent, to $39.25 and Swire Pacific A was up $1.25, 3.4 per cent, to $37.50. Hutchison Whampoa continued its climb following the sale of a majority stake in HutchVision to News Corp for US$525 million. The stock climbed 30 cents to $21, while stablemate Cheung Kong rose 50 cents to $25.20. A recent research report by Crosby Securities said the longer-term shape of Hutchison's business remained uncertain, and it recommended taking profits above $22. Bank of East Asia and Winsor Industrial were the only index stocks to slip yesterday, after both announced disappointing results. Bank of East Asia fell 50 cents to $33.75 following a $1 decline on Thursday when it released lower-than-expected interim results. MeesPierson deputy director of institutional sales Tony Burpee said investors were switching out of Bank of East Asia and into Guoco Group and Hang Seng Bank. He expected that trend to continue. Winsor Industrial fell 80 cents, 6.2 per cent, to $11.90 after reporting on Thursday a 3.6 per cent dip in profits for the year to March 31. Schroder Securities yesterday reconfirmed its sell recommendation on Winsor due to its unexciting earnings prospects and confusing diversification strategy. Mr Burpee said foreign investors were focusing on stocks with high yields, or defensive counters involved in infrastructure projects. He said this sentiment would affect stocks such as Hopewell, which rose five cents to $4.60, China Light, Henderson Land, Hong Kong Land and Sun Hung Kai & Co. Shun Ho Construction posted the largest percentage increase, jumping 30.9 per cent, 47 cents, to $1.99. The company issued a statement that it was unaware of any reason for the price increase. Joyce Boutique added another 12 cents, 14.8 per cent, to 93 cents after announcing a surprising 3.8 per cent climb in profits for the year to March 31. China Investment was up 8.4 per cent, 25 cents, to $3.20, while its 1993 warrants surged 77.2 per cent, 3.4 cents, to 7.8 cents. Hongkew Holdings started trading again after being suspended since 1991 due to financial difficulties. The stock closed at $4.925 after hitting an intra-day high of $10. Shanghai Petrochemical continued to slide, losing five cents to $1.46. The stock is now trading 7.5 per cent, 12 cents, below its issue price of $1.58. Nikko Securities research manager Peter Lui said the market had been supported by the lack of selling by foreign investors. ''At this level, they are very reluctant to sell their holdings, but if the market goes to 7,200 or 7,300, we will see more overseas selling again,'' he said.