NEAR panic-selling in property sector stocks drove the index down 3.1 per cent to send it crashing below 9,000 yesterday in heavy trading. The Hang Seng Index, which dived 286.42 points to 8,934.59, has lost seven per cent, or 666 points, since last Thursday when it stood at 9,600.63. Volume was $4.86 billion, reflecting strong overseas selling. Share turnover was 800.49 million in 36,706 deals. Heavy foreign sell orders at the opening saw the index plunge 360 points in the first 90 minutes as panic-struck institutions exited their positions. The selling pressure was particularly strong from European institutions, which have been traditionally long-term supporters of the market. The looming threat of an interest rate increase today offered no comfort to investors caught long in property stocks. Most affected were the residential developers, with Sun Hung Kai Properties down a heavy $2.75 to $47 and Cheung Kong off $1.75 to $35.75. With no sign of a halt to the decline in property prices and every sign that they will fall even further, the outlook for property stocks is bleak. The Land Commission's announcement yesterday that 117 hectares of additional land would be released for development was tantamount to putting a drop of blood in a pool of sharks. Investors ignored the point that 117 hectares is a negligible addition to the land stock as they moved in for the kill. Baring Securities director James Osborn said: ''It is all very well for the Government to talk about cooling the market, but in Hong Kong it's either full-on or full-off. The danger is you could see panic in the market.'' He said people at most are expecting a five to 15 per cent fall in property values, but had to face the uncertainty of even further devaluations. SBCI derivatives salesman James Vinall said the market probably had further to fall because there were many who thought property stocks should be trading lower. He said it was difficult to price property counters because the values kept being revised. The uncertainty is leading risk-averse investors to keep out of the market until the situation becomes somewhat clearer. Brokerages said there was some sign of support from Hong Kong investors who knew the companies well, but they were not enough to counter the enormous amount of foreign money which was flowing out. The market moved in a 292-point range throughout the day, from 9,152.86 to 8,860.51. Trading opened with the market diving 200 points before catching its breath to bounce back slightly at the 9,000 mark. As it became clear the market would not hold the 9,000 mark, traders sold and the index fell another 150 points to hit the day's low around mid-morning. The morning session closed 245.72 points down at 8,975.29. In the afternoon, the index dropped lower to close near the bottom end of the trading range. Henderson Land slipped 4.4 per cent to close $1.75 lower at $38. HSBC was a big loser, dropping $3 to $85. The counter has shed $7.50 since last Thursday when it stood at $92.50. The last time rates were raised the banks increased deposit rates more than lending rates, which eroded their margins. Analysts are concerned that a rate increase today would further erode the bank operating margins if the same pricing structure is used. CITIC Pacific was again down, falling 80 cents to $21.20. Utilities stood out, putting up some resistance to the fall. China Light and Power slipped 75 cents to $42.75 while Hong Kong Electric lost 40 cents to close the day at $23.