A pedestrian walks past a Hang Seng Index market indicator on a sidewalk in Mong Kok on Monday. Hong Kong stocks dropped to the month-lowest on Tuesday. Mok Kwok Cheong / China Daily

Hong Kong shares ended a choppy session at their lowest in a month on Tuesday, dragged down by a 4 percent loss for CNOOC after the Chinese oil giant announced plans to acquire Canadian oil producer Nexen Inc.

Typhoon Vicente forced cancellation of morning trade, so turnover was reduced, heightening market volatility. Fragile sentiment was not improved by a preliminary survey showing a slight improvement in July manufacturing in China.

The Hang Seng Index closed down 0.8 percent at 18903.20, its lowest close since June 25. Almost four stocks fell for each that rose on the 49-member gauge. The China Enterprises Index of the top mainland listings in Hong Kong shed 0.6 percent.

"Investors are more cautious," said Linus Yip, a strategist at First Shanghai Securities. "They are waiting to see whether there will be more easing, not only in the mainland, but also globally."

The Hang Seng Index has fallen 13 percent from this year's high in February on signs Europe's debt crisis is worsening while growth slows in China and the US. The drop cut the value of shares on the gauge to 9.9 times estimated earnings on average, compared with 13.1 for the Standard & Poor's 500 Index and 10.6 for Stoxx Europe 600 Index.

Sentiment remained weak after Moody's Investors Service said it may cut Germany's credit rating and a measure of French business confidence missed estimates.

Futures on the Hang Seng Index fell 0.7 percent to 18850. The HSI Volatility Index gained 2.3 percent to 22.70, indicating traders expect a swing of about 6.5 percent in the benchmark index during the next 30 days. The measure surged 18 percent on Monday, the most since May 7.

CNOOC fell 4 percent to HK$14.82 in its biggest fall since May 7 after agreeing to pay $15.1 billion for Canadian oil and gas explorer Nexen Inc, 20 percent above the value of the Calgary-based company's total assets. It is the biggest overseas takeover by a mainland company.

"Investors are not too impressed at the big premium CNOOC is paying for Nexen," said Edward Huang, equity strategist at Haitong International Securities. "It looks a bit expensive, but I think we need to wait for more details to make a final judgment."

Tuesday's fall left shares of CNOOC at their lowest close in a month. China's third-largest oil company hopes to sell the proposed deal to buy Nexen - at a hefty 61 percent premium to Friday's stock price - to shareholders and the Canadian government.

China Daily - Agencies

(HK Edition 07/25/2012 page2)