Our Comments and Expectations
External Background. Yesterday, the S&P 500 index map turned almost entirely red. The only green spot was Google stock, which rose by 2.9% after the company announced it would roll out “AI Overviews” in search to all users in the U.S. The main focus was on the growing U.S. budget deficit, which impacted the Treasury bond auction and investor sentiment in the stock market. Investors remain concerned that Trump’s tax plan could add trillions of dollars to the budget deficit in the coming years. Intense debates took place yesterday among Republicans, who are split into factions — supporters and opponents of the bill. The S&P 500 began pulling back from its recent 2.5-month highs. Former Treasury Secretary Steven Mnuchin said he was more concerned about the growing budget deficit than the trade imbalance and urged Washington to prioritize fiscal consolidation. In Europe, the Stoxx 600 index remained neutral, while Germany’s DAX continued to rise, once again hitting new all-time highs. This morning, Asian markets are down — Hang Seng and Kospi are both losing 1.2%. Futures on the S&P 500 are up 0.2%, while futures on the Stoxx 600 are down 0.5%.
Bonds. The main event in the bond market was the weak demand for 20-year U.S. Treasury bonds, coupled with a weakening dollar — despite the usual strong correlation between yields and the DXY index.
KASE Index. Yesterday, the KASE index declined by 0.6% amid weakness in global markets. Three stocks posted losses of more than 1%. Today, the key market event is the sell-off of Kazakhtelecom shares.
Index Stocks. As trading opened, Kazakhtelecom shares dropped by 31.5%. As expected, trading was halted due to the sharp losses in a short time. Since not all investors were able to sell their shares in the morning due to the trading suspension and Frankfurt auction, we believe losses could ultimately reach 35% to 40%. This would bring the share price back to the sideways trend ranges of July–November 2024 or April–June 2024. These levels (38,000 and 33,000 tenge) can be seen as significant support zones. Due to Kazakhtelecom’s relatively small weight in the index (4.91%), KASE dropped only 2.2% at the opening. Kazatomprom shares are also in the red today, after having gained yesterday on both KASE and LSE. The trigger for the pullback may be the decline in uranium prices — from $71.5 to $70.95 for the nearest futures contract.
Currency. On the FX market, the dollar is down to 506.9 tenge. This could be due to the approaching end of the May tax period and the general weakening of the dollar globally. Previously, we didn’t consider the scenario of the tenge strengthening to 500 per dollar. However, a further 6-tenge drop in the USDKZT rate is not out of reach. That said, we maintain a negative outlook on the tenge for June and July.