Our comments and expectations
External background. The S&P 500 closed flat after two sessions of gains. In July, U.S. wholesale inflation accelerated at the fastest pace in three years, reflecting companies absorbing higher import costs related to tariffs. The Producer Price Index rose by 0.9% from the previous month and by 3.3% year-over-year. Service prices increased by 1.1% last month. Earlier this week, the Consumer Price Index showed the opposite trend, remaining relatively low. Next in focus are Friday’s retail sales report and the key consumer sentiment indicator. In corporate news, Intel shares jumped amid reports that the U.S. may be considering acquiring a stake in the chipmaker. In Europe, indices posted solid gains, narrowing the gap with the S&P 500. In Asia, Hong Kong’s Hang Seng is down 1% this morning. Reports suggest that in July, China’s economy slowed across the board: industrial activity, investment, and retail sales disappointed, highlighting the negative impact of Donald Trump’s tariff-related side effects. Japan’s Nikkei 225 is up 1.7% following data showing that the country’s economy unexpectedly grew by 1.3% in Q2 versus a forecast of 0.7%, supported by resilient domestic demand. Oil rose to nearly $67 yesterday but is retreating to $66.6 this morning. S&P 500 futures are up 0.27%, which, if sustained into the open, may push the index to new highs.
Bonds. The U.S. 10-year Treasury yield climbed to 4.29% following the producer price report, remaining volatile throughout the session.
KASE Index. The KASE index gained 0.4%, once again setting a new all-time high. However, growth over the past two sessions has remained moderate.
Index constituents. The main contributor to yesterday’s index growth was BCC shares. Recall that the stock has been rallying since news broke that the bank had repaid early a 60 billion tenge government loan provided in 2017 as state support. This points to the possibility of dividend payments next year. In addition, Halyk Bank and Kazatomprom shares posted gains. Kazatomprom GDRs in London continue to show an interesting pattern: while most consolidations tend to occur within a narrowing triangle, in KAP’s case it is accompanied by widening volatility. Yesterday, GDRs closed at $44.75, with the session low at $41. We also note a reversal in Halyk Bank GDRs and Kaspi ADS — we do not recommend buying these securities locally until the trend becomes clearer: either correction or consolidation.
Currency. The dollar continues to move sideways against the tenge: yesterday USDKZT closed neutral, while today the dollar is showing a slight uptick, suggesting deeper consolidation.