Sept. 18 (Bloomberg) -- Developing-nation stocks dropped, dragging the MSCI Emerging Markets Index from its highest level in more than a year, as commodity prices retreated and Chinese regulators said banks face higher risks. China’s Shanghai Composite Index slumped 3.2 percent, the steepest decline among global equity markets. Industrial & Commercial Bank of China Ltd., the nation’s biggest bank, dropped 2.2 percent in Shanghai trading. Jiangxi Copper Co., China’s biggest producer of the metal, fell 5.4 percent. Poland’s WIG20 Index and Hungary’s BUX Index both lost 0.5 percent. Stockpiles of copper, used in everything from pipes to wiring, rose for their longest streak since January to the highest level since May. The China Banking Regulatory Commission said banks face more risks because of a surge in lending this year, through a statement on the regulator’s Web site. “The biggest concern of this rally is in Asia,” said John Lomax, head of global strategy for emerging markets at HSBC Holdings Plc in London. “The economic growth looks more true for U.S. and less true for China.” The MSCI Emerging Markets Index slipped 0.3 percent to 916.78 at 10:30 a.m. in London, trimming this week’s gain to 2.5 percent. The gauge of 22 developing nations dropped for the first time in four days on concern this year’s 62 percent rally outpaced earnings prospects after valuations rose to a record high of 21 times reported income. Crude declined 1.2 percent to $71.63 a barrel in New York and prices for copper, aluminum, zinc, lead and nickel fell in London, damping the earnings outlook for raw-material producers. KGHM Polska Miedz SA, Poland’s sole copper producer, lost 1.8 percent and Mol Nyrt, Hungary’s largest oil company, declined 1.4 percent. The Shanghai Composite Index, which rebounded 15 percent in September through yesterday, fell the most in nearly three weeks, led by commodity producers and banks. PetroChina Co., the nation’s biggest oil company, dropped 2.5 percent. Industrial & Commercial Bank of China and Bank of China Ltd. both retreated more than 2 percent. The extra yield investors demand to own developing nations’ bonds instead of U.S. Treasuries was unchanged at 3.21 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. Yields on Ukrainian bonds dropped 18 basis points. To contact the reporter on this story: Zijing Wu in London zwu17@bloomberg.net.

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