Emerging market stocks see the biggest monthly drop in two years. Overview

“Emerging markets are vulnerable to profit-taking caused by the prospect of an increase in U.S. rates and unfavorable data coming out of China,” Allan Yu, first vice president at Metropolitan Bank & Trust Co., which manages $7.27 billion, said to Bloomberg by phone in Manila. “As U.S. rates go up, funds moving to emerging markets could slow while a slowing China can affect growth of other Asian economies.”

Emerging-market stocks headed for the biggest monthly drop in more than two years as a Chinese manufacturing gauge trailed estimates and demonstrations in Hong Kong paralyzed parts of the city for a third day.

China Construction Bank Corp. led a gauge of Hong Kong-traded Chinese shares to a three-month low.

The MSCI Emerging Markets Index fell 0.3 percent to 1,006.42 at 9:44 a.m. in London, extending this month’s loss to 7.5 percent. The gauge is set to halt its longest monthly winning streak since 2005 as a slowing Chinese economy and prospects for higher U.S. rates curb risk appetite. A report today showed a Chinese manufacturing gauge fell from an initial reading a week ago. Student leaders of Hong Kong’s protests set an Oct. 1 deadline for their demands to be met.

The developing-nation stock gauge has fallen 4.2 percent this quarter, set for the steepest loss since June 2013, and trades at 10.8 times 12-month estimated earnings.

The MSCI World Index has dropped 2.4 percent and is valued at a multiple of 14.8, data compiled by Bloomberg show.

China’s Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics for September was at 50.2, lower than the preliminary figure of 50.5 and unchanged from August. Numbers above 50 signal expansion.

The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong, fell 1.2 percent, capping the worst month since January.

China Construction Bank and Bank of China Ltd. decreased at least 1.4 percent.

Hong Kong’s biggest political unrest since the 1960s is wiping out the valuation premium of the city’s stocks over their Shanghai counterparts.

The Shanghai Composite Index capped its best quarterly gain since 2009 as coal producers rallied on the prospect that government reforms will support prices.

The Hong Kong Federation of Students said yesterday that more people will join the protests on Oct. 1 and 2 if the government fails to respond. Protest organizers are insisting that the city’s top political figure, Chief Executive Leung Chun-ying, resign and that the government in Beijing drops plans to control who gets to run as Leung’s successor in 2017.

Five out of 10 industry groups in the developing-nation stock gauge fell, led by technology and telecom shares.

Samsung, the world’s biggest maker of smartphones, slid 0.9 percent.

The Kospi decreased 0.3 percent, its fourth day of declines.

The Indonesia’s rupiah weakened 4 percent this month, the most since November. Overseas investors sold $542 million more shares than they bought in September, the biggest outflow since June 2013, exchange data show. South Korea’s won completed its biggest monthly loss since May 2012.

The Russian ruble rose 0.1 percent, poised to pare the worst quarter since 2009, while the Micex Index declined for a fourth day, losing 0.2 percent.

Ukraine’s army suffered its highest casualties since signing a Sept. 5 truce in new clashes with pro-Russian fighters that are threatening to shatter a cease-fire that brought calm to the six-month-old conflict.

Indian shares fluctuated and the rupee weakened for a second day. India’s central bank left interest rates unchanged for a fourth straight meeting.

Dubai’s DFM General Index advanced 0.7 percent, extending gains this quarter to 28 percent.