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HONG KONG: Stocks finished sharply lower as a round of late derivatives-linked selling added excitement to what had been an uneventful day, brokers said.

"The market was pretty steady in the morning but it fell steeply in late trade when foreign houses sold futures in heavy volume," said Teresa Wong at DBS Securities.

The Hang Seng Index dived 88.39 points to close at the day's low of 8,896.66. It gained more than 48 points and was locked within a tight range in the morning session.

Turnover was HK$2.91 billion against an adjusted HK$3.39 billion on Wednesday.

August and September index futures both finished at 8,860, losing 135 and 140 points respectively.

"It seems that they (foreign investors) really want to test the bottom of 8,850," DBS's Wong said.

Technical analysts said the index's 250-day moving average at today's close stood at about 8,855 and if that level was breached another selloff could be expected.

Asian houses were seen following the declining futures by dumping HSBC Holdings and Hong Kong Telecom shares, a broker said. HSBC eased HK$1 to HK$100 and Hong Kong Telecom fell five to HK$13.55.

"Buyers are not aggressive and many of them are taking a wait-and-see attitude," said Alex Tang, head of research at Yamaichi International. "I believe the main index will continue to test the downside, with new developments on China-Taiwan relations the market's major concern."

Wharf's lower operating profit, announced on Wednesday, also increased worries about the already depressed property counters, he added.

Wharf rose 20 cents to HK$22.65 on bargain hunting. Cheung Kong lost 40 to HK$37 and Sun Hung Kai eased 75 to HK$51.75.

The All Ordinaries Index fell 30.26 to 4,373.93.

China state-owned enterprises were mixed but the H share index was down 7.37 points to 1,003.73.

Luoyang Glass plunged almost six percent to HK$3.625, down 22 cents.

Qingling Motors added five cents to HK$2.375 and Beiren Printing and Chengdu Telecom gained two each to HK$1.67 and HK$2.60.-Reuter