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Emerging Stocks Trim Monthly Advance as Sberbank Tumbles

Emerging-market stocks fell, trimming the biggest monthly rally in 20 months, as OAO Sberbank led declines in Russia and Indian lenders retreated on concern the central bank will tighten monetary-policy further.

The MSCI Emerging Markets Index dropped 0.3 percent to 999.88, extending its weekly retreat to 1.3 percent. Sberbank slumped 2.9 percent amid bets Russia’s biggest lender will need additional capital to pay dividends at the level sought by government. ICICI Bank Ltd. (ICICIBC) decreased 2.4 percent in Mumbai. The Borsa Istanbul National 100 Index fell for a sixth day. South Africa’s rand capped the longest slide in almost two months.

Sberbank would need to boost capital to pay 35 percent of income in dividends and lending would slow if such a rule was set, Interfax and RIA Novosti cited Chief Executive Officer Herman Gref as saying. India’s central bank will add to last week’s surprise rate increase, seven of 10 analysts said in a Bloomberg News survey. Mounting concern that a political impasse over the U.S. federal budget will hurt the world’s largest economy also drove emerging-market equities lower.

“Managers are going to try to lock in their gains,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by phone. “Particularly in asset classes that are perceived as riskier, including emerging markets.”

The benchmark measure for developing nations has rallied 6.3 percent in the quarter. It traded at 10.5 times projected earnings, compared with the valuation of 14 for the MSCI World Index, according to data compiled by Bloomberg.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund slid 1.2 percent to $41.24. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 4.6 percent to 23.44.

Brazil’s Ibovespa posted its first weekly decline in September on concern that a U.S. political impasse will curb global demand for riskier assets. OGX Petroleo e Gas Participacoes SA, the oil company founded by Eike Batista, extended its plunge for the week to 26 percent.

Russian stocks fell, paring the best monthly gain in almost two years. Sberbank, which has the second-biggest weighting on the Micex Index, posted the biggest decline since June 20. The nation’s Finance Ministry is calling for state-run companies to increase payouts to at least 35 percent of profit under international accounting standards from 2016.

Turkish Shares

The Borsa Istanbul National 100 Index capped the longest slide since July 26 as Akbank TAS (AKBNK) and Turkiye Garanti Bankasi AS dropped at least 2.9 percent.

Indian stocks declined, with the benchmark index halting a four-week rally, after central bank Governor Raghuram Rajan’s comment that inflation is still high. ICICI Bank (IBN) dropped to the lowest level since Sept. 5. The S&P BSE Bankex Index retreated 1.8 percent.

China’s stocks capped a third straight monthly advance as gains by drugmakers and technology companies countered losses in companies linked to the Shanghai free-trade zone. Shanghai Fosun Pharmaceutical (Group) Co. (600196) and Yunnan Baiyao Group Co. led a gauge of health-care stocks to the biggest increase among industry groups. Shanghai International Port (Group) Co. (600018) tumbled for a second day after more than doubling this quarter.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 331 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Zahra Hankir in London at zhankir@bloomberg.net; Matthew Kanterman in New York at mkanterman2@bloomberg.net; Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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