DANCING freely and happily on stage, 230 competitors in the fourth Hong Kong Dancing Contest for Persons with Mental Handicap showed they had equally impressive talents as normal people. The contest, organised by the St James' Settlement, was joined by 31 rehabilitation organisations this year. ''This year is a breakthrough,''said the supervisor of the Rehabilitation Division of the St James Settlement. ''We have so many competitors that we had to move the contest from our centre in Wan Chai to the Hong Kong Academy For Performing Arts.'' The contest aims to show that the mentally handicapped can integrate with society. It also gives the public a better understanding of them. Commercial Radio 2 showed its support by sending seven members of its community service group, Man Yan Bon as guest performers. The seven were pop singers Dicky Cheung Wai-kin, Julian Cheung Chi-lam, William So Wing-hong, Ekin Cheng Yi-kin, Raymond Choy Chai-man, K. C. Lee and Luk Ka-chun. The contest reached its climax when each singer led a group of competitors on stage and sang their popular hits. Luk Ka-Chun took the lead by singing How Did My Love For You Start? while the 40 contestants started dancing with the other six stars. The contestants waved at the audience and smiled at the photographers. Since all the contestants did well, it was decided they would share the victory. They all received gifts from the singers. ''We didn't have any rehearsals; the competitors were great!'' said Dicky Cheung. ''It's been a long time since I've had such fun.'' Raymond Choy was happy to share the stage with the contestants. ''They are like normal people; they need love and attention.'' ''People have wrong notions about them. They are not scary; just give them more love and patience and they will be like everyone else,'' William So said. The contestants were thrilled to dance with the singers. ''I am very happy,'' said 32-year-old Lam Hing-mun. ''We hope there will be more activities of this kind,'' Hing-mun's social worker said.