HONG KONG stocks have further to fall, warns Baring Securities director for Asian strategy Alan Butler-Henderson. The market should be trading in the 7,800 to 8,800 range by June, said Mr Butler-Henderson, adding that property-sector stocks are most at risk. ''I can't see the market going smoothly with all the problems in America,'' he said. Mr Butler said he was concerned that the market had rallied so quickly after its 25 per cent fall since the high of early this year. ''I am concerned that there has not been enough falling to signal the proper end of this phase,'' he said. On a sectoral basis, property stocks were most at risk because they had not corrected as much as other sectors. Mr Butler-Henderson said that while the market as a whole had corrected and was trading 20 per cent above September 1993 levels, the property sector was still 50 per cent higher. Gains made in the stock market were being put into property as a hedge against inflation. The large influx of foreign funds into the stock market at the end of last year simply added to the pile of money which was pumped back into the property market. ''If the equity market goes flat it is extremely likely property will too'', he said, adding that even given the massive under-supply problem sooner or later property will follow stocks. ''I don't say they are massively overvalued, but at this stage of the cycle they are quite expensive,'' he said. Mr Butler-Henderson said property stocks probably had 18 months of peak profits ahead of them, but that the cycle was turning. ''Look out your window at the West Kowloon reclamation and you can see where the seeds of the next major downturn will come,'' he said. He also warned that Hong Kong's capital investment was falling behind other dragon economies like Singapore and that businesses would set up elsewhere if the trend was not reversed. He said funds were going into the stock market instead of building up and renovating capital stock. ''The strain is showing in the lack of office space, the pressures at Kai Tak, the full hotels, and the full MTR.''