KUALA LUMPUR, Oct 20 — Emerging-market stocks retreated from a two- month high and currencies weakened as a selloff in commodities along with prospects of higher US interest rates curbed demand for riskier assets.

China’s Cnooc Ltd. and South Korea’s Posco fell 1.9 per cent to lead energy and materials stocks lower after the Bloomberg Commodity Index sank 1.4 per cent yesterday.

Hong Kong’s Hang Seng China Enterprises Index slid from a two-month high.

Malaysia’s ringgit headed for a two-week low versus the dollar, while Indonesia’s rupiah and South Korea’s won declined 0.7 per cent.

The MSCI Emerging Markets Index lost 0.4 per cent to 864.15 at 12:21 p.m. in Hong Kong, halting a three-day gain.

The Bloomberg Commodity Index sank the most in a month yesterday after data showed China’s economy in the third quarter expanded at the slowest pace since 2009.

Federal Reserve Bank of San Francisco chief John Williams said the US central bank should raise interest rates in the near future as inflation is expected to stabilize and growth will stay on track.

“Markets are reacting to the Chinese data because basically China is the major commodity buyer, if they are slowing down then their demand for commodities is also going to slow down,” said Andrew Sullivan, managing director for sales trading at Haitong International Securities Group in Hong Kong.

“It is part of the wider global stance of waiting for the Fed to make a decision as we are all looking for certainty, not maybe.”

Rate outlook

Fed officials at their meeting last month kept rates near zero amid growing risks to their outlook, due primarily to slower growth in China.

Chair Janet Yellen, Vice Chairman Stanley Fischer and other officials, including Williams, have since said they still expect a rate rise is warranted this year. Policy makers meet again October 27-28 and in December.

The developing-nation gauge has dropped 0.6 per cent this year and is valued at 11.3 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index, which has retreated 1.7 per cent in 2015, trades at a multiple of 15.7.

All 10 industry groups in the emerging-markets index declined, led by energy and materials companies. Cnooc, China’s biggest offshore oil and gas explorer, declined for a second time in three days. Posco, a steelmaker, slid the most since September 23. 

China shares

The Hang Seng China Enterprises gauge retreated 0.8 per cent and the Shanghai Composite Index slid 0.1 per cent. China’s small-company stocks rose, sending the ChiNext Composite Index to the highest level in two months, after economic data showed faster growth in the services sector and margin debt posted its longest stretch of gains since August.

The ringgit weakened 0.8 per cent, its third day of losses, and Malaysian stocks fell 0.3 per cent on concern falling raw- materials prices will hurt government income and widen the budget deficit.

Malaysia’s government gets 22 per cent of its revenue from oil-related exports and Prime Minister Datuk Seri Najib Razak is scheduled to deliver his 2016 annual budget plan on Friday. 

The rupiah slid for a third day and the won halted a four- day increase. A Bloomberg gauge of developing-nation currencies dropped for a third day.

Equity gauges in Indonesia and Thailand climbed 0.3 per cent. — Bloomberg