LOCAL investors dumped Hong Kong stocks yesterday sending the Hang Seng Index diving 369 points through the important 10,500 mark. The index lost 3.4 per cent to close at 10,456.45 on tunover of $4.26 billion. Brokers say the spectre of further interest rate increases in the United States and the political reform bill, due to be tabled by Governor Chris Patten tomorrow, are forcing the market down. The Robert Fleming Index, which tracks Hong Kong stocks trading in London, was down a further 89 points to 10,369 at 11.30 pm. Analysts expect further falls as investors stay out of the market waiting for the outlook to improve. They also still expect the Hong Kong Association of Banks, which takes action on interest rates at its meetings every Friday, to push interest rates up here.