RED chips and H shares continued to dominate the market for the second day yesterday, swelling turnover to $4.61 billion in a day of heavy speculative buying. The Hang Seng Index lost 18.08 points to 7,339.55 due mainly to investors locking in profits, and blue chips fell across the board. Trading was buoyant when the market opened, with the index gaining 53.93 to 7,411.57 at 10.15 am but then gradually sliding before closing for the morning. Things became sluggish after reopening and trading was virtually flat for the whole afternoon. Vickers Ballas director Barry Yates said the market was undecided on the direction it would take. ''Investors are undecided as to where to go from here.'' He said investors might be waiting for some news from the Sino-British talks scheduled for next week. ''At this point, the market is very difficult to please but easy to disappoint,'' he said. August index futures closed at a 14.55-point discount to the cash market. The contract closed at 7,325, up 17 on the day on turnover of 7,564 contracts. Total index futures trading was a modest 7,762 lots. James Vinall of SBCI Derivatives said futures indicated market stability because they were not moving much, either up or down. There were eight red chips or H shares in the list of the 10 heaviest-traded stocks. Seapower Securities research director Samuel Lau Kwok-leung said local investors jumped on the bandwagon, snapping up red chips and H shares. He said: ''Heavy trading on H shares and red chips attracted the attention of short-term punters who are day traders - buy in the morning and sell in the afternoon. Mr Lau expected prices of H shares to face a correction in the short term as prices had been pushed up too quickly. He said: ''The prices of H shares on an average have jumped close to 50 per cent up within a week or so. ''There are still economic problems in China and you cannot expect the fundamentals to change suddenly.'' Shanghai Petrochemical was the heaviest-traded stock on turnover of $515.1 million to push the price up 24 cents to $1.99, an increase of 13.7 per cent. Crosby Securities cautioned the stock was not cheap at the current level as it was trading at 23.1 times historic earnings and 14.8 times 1993 fully diluted earnings. With further new A shares to be issued, the dilution of its earnings per share is expected to continue in 1994. Shougang International increased five cents to $6.10 while Santai Manufacturing was up 17.5 cents to $4.47. Guangzhou Shipyard, which made its debut last Friday, gained 32.5 cents to $3.375, up 10.65 per cent. Paragon Holdings rose three cents to 70 cents while Emperor (China) went up 15 cents to $5.70. China Aerospace gained 50 cents to $6.25. Kader Investment fell 50 cents to $37.50 after rising rapidly over the past few days. HSBC Holdings was unchanged at $81.50 following the Swiss Bank Corp announcement on Wednesday that it would issue up to 120 million call warrants on HSBC at $1.71 each. Under the plan, every 10 call warrants will entitle the holder to buy one existing HSBC share. The exercise price will be $81.50 a share, subject to adjustment. TVB jumped $2.70 to $25.20, a surge which Mr Yates attributed to Shaw Brothers' announcement on Wednesday of a 29 per cent jump in attributable profits to $228.6 million, ahead of market expectations. Shaw Brothers holds a 34.5 per cent stake in TVB. Chuang's China Investments was up 2.5 cents to $2.575 after the company reported a turnaround to post an attributable profit of $104.7 million for the 15 months to March 31. This compared with a loss of $17.2 million for the 12 months to December 31, 1991. Oriental Press gained 32.5 cents to $3.45 after the company reported a doubling of net profits to $420.22 million in the year to March 31.