Options point to bearish sentiment on Chinese shares

HONG KONG - Options to protect against declines in Chinese stocks are the most expensive in four years as traders lose confidence in forecasts for a rally.

The price for three-month bearish put options to sell the Hang Seng China Enterprises Index rose to 1.41 times the cost of bullish call options on Sept 1, the most since March 2007 and up from 1.05 in May, according to data compiled by Bloomberg. Puts that pay owners should the gauge fall 10 percent cost 1.34 times bullish contracts as of Wednesday.

Investors are seeking insurance from declines after the index of Chinese companies available to foreign investors fell 12 percent last month, the most since October 2008, leaving the stocks with the lowest price-earnings ratio in almost three years.