HSBC Holdings was down more than a $1 to $85.55 and Hongkong Telecom was down 40 cents to $15.80.

Even Hutchison Whampoa, which saw strong buying in Hong Kong on the back of the closure of the Rabbit telecoms network in the UK, fell 20 cents to $28.40.

Brokers said that, although Hong Kong and overseas institutions had jumped on the bargain-hunting bandwagon in Hong Kong trading, overseas institutions trading in London were more cautious.

There was some profit-taking and quite a number of dealer mark-downs, in anticipation of a low Hong Kong opening today.

HG Asia director Alan Hargreaves said that the fall of the index below 9,000 had inevitably touched off a technical correction in Hong Kong yesterday.

''Local investors were hunting for bargains, while overseas investors were also buying selectively,'' said Crosby Securities dealing director Willie Chau Wing-hung.

Blue chips and some red chips were the main targets of bargain hunters, said one broker.

Baring Securities assistant director James Slade said: ''It was very much a futures-related market.'' Investors were covering short positions in futures by buying a basket of stocks, he said.

''The market is still very volatile,'' said South China Brokerage director Howard Gorges, despite yesterday's apparently positive mood.

''The market sentiment has been swinging very widely,'' he said. ''One week ago, too many people agreed the surging market would go up to 10,000 points. This weekend, sentiments turned bearish.'' Political concerns added to uncertainties facing the market, with the publication of a report in the British newspaper The Observer on Sunday claiming that China had drawn up a hit list of British companies to face sanctions if Governor Chris Patten pushed ahead with political reform.

Other uncertainties include the performance of Wall Street and inflation fears in the US.