THE absence of US buyers, selling by European investors and rumours of bad political news sent the Hang Seng Index dropping 117.48 points yesterday to close at 7,475.97. The market traded on a weak turnover of $2.79 billion as brokers expressed surprise at the lack of activity from US institutional investors. September index futures fell 139 points to 7,406, giving a discount of 69.97 points to the cash market. Total volume in index futures was 7,348 lots. Barclays de Zoete Wedd sales manager Nial Gooding said there was negative news on Hong Kong's political situation in the London press over the weekend. ''The stories over the weekend suggested that the Sino-British talks were near collapse,'' he said. ''They perceived the situation as being much worse than what it actually was. Over here in Hong Kong, locals would have just shrugged it off but over there, people took the news seriously.'' He said European selling accounted for the sudden dive in the Hang Seng Index after lunch. The market opened sluggishly, gaining seven points after 15 minutes of trading. It then went into a slow decline, losing 37.55 points before trading closed for lunch. When the market reopened in the afternoon, trading was flat until European investors moved in to dump shares. The index hit an intra-day low of 7,470.82. Mr Gooding described the lack of US institutional activity as a pause in their buying. He said US investors were buying with a five-to 10-year view. ''US investors have a positive effect in the market. In the event of any positive news, they will push the market up higher than expected. ''And in the event of bad news, they will cushion the market with their liquidity.'' Nomura International vice-president Gary Wong said apart from the lack of US buyers, investors were also tired of waiting for positive news to come out of the political talks. ''People are waiting for the market to correct itself before committing themselves,'' he said. Blue chips took a beating across the board, which was reflected in the Hang Seng sub-indices which fell in all sectors. The property sub-index was the worst hit, losing 2.2 per cent or 255.11 points to 11,332.3, followed by the conglomerates and commercial sector, which shed 1.62 per cent or 94.96 points to 5,752.94. The finance sector slumped 1.47 per cent or 106.34 points to 7,117.28 and the utilities sector dropped 0.78 per cent or 70.27 points to 8,905.94. Cheung Kong fell 70 cents to $27.20 while Sun Hung Kai Properties lost $1 to $38. Hutchison Whampoa fell 80 cents to $24 as investors took profits. Investors continued to cash in utility stocks following their recent rise. China Light and Power fell $1 to $42.50 while Hong Kong and China Gas lost 30 cents to $14.40. HSBC tumbled $1.50 to $81.50 and was the heaviest-traded stock in value terms with shares worth $138.99 million dealt. Hang Seng Bank gave up 50 cents to $53.50. Eastern Century declined 35 cents to $3.60 following the announcement that Shougang Concord International Enterprises will take a 54.3 per cent in the company for $624.4 million. Eastern Century had the third highest turnover of $99.65 million. Jardine Matheson closed down $1 to $62. South China Morning Post resumed trading and its share price fell 50 cents to $4.85. Crosby Securities dealing director Willie Chau Wing-hung said investors were disappointed with the news of the deal between News Corp and Kerry Media as they were expecting a general offer. Leung Kee also resumed trading. The company announced that a takeover agreement had been reached with certain shareholders of Leung Kee's holding company. The company said if the agreement was completed, it would result in a general cash offer being made to other shareholders. Leung Kee rose 12 cents $1.20.