Our Comments and Expectations
External Background. On Friday, the S&P 500 dropped sharply by 6%. This time, the "safe haven" on the index map wasn't utility sector stocks, but rather a few regional construction companies and niche retailers like Nike. The Nasdaq has declined by 21.7% from its highs and, according to traders' informal rules, has entered a bear market. Fed Chair Jerome Powell indicated that the damage from the trade war could be greater than previously expected, with potential consequences including higher inflation and slower growth, which intensified panic in the markets. An additional factor behind the decline was China’s retaliatory response — a symmetrical 34% tariff on Trump’s measures, effective April 10.
It's worth noting that the panic continues today — S&P 500 futures are currently down 4.91%. In Asia, Japan’s Nikkei 225 dropped 7.83% in the morning session, and trading was temporarily halted due to excessive losses in a single session. Hong Kong’s Hang Seng is down 12.5%, although this reflects the accumulated effect of two trading sessions. BNP Paribas’ Chinese division remains optimistic, stating that in the short term, China’s market may be more resilient than many others.
Bonds. The yield on 10-year U.S. Treasuries fell slightly below 4%, while U.S. high-grade bonds within the LQD ETF saw a minimal decline of 0.1%.
KASE Index. The KASE index also felt the impact of global market instability. Shares of Halyk Bank were hit the hardest, with signs of panic selling. This morning, the index opened down 2%, although it has since attempted to recover some losses during the session. We believe that turbulence will persist in local stocks that have shown the most growth in recent months, while defensive assets are likely to remain stable.
Index Stocks. Judging by the movement of individual stocks, the most significant contributors to the correction are BCC (–5%) and Kaspi.kz (–4.3%). Notably, Kaspi fell 8.1% on the Nasdaq, largely due to pressure from the local market, where the index declined by about 6% yesterday. As for Halyk Bank, there appears to be risk aversion, possibly from a small number of investors with large volumes. A similar picture can be seen in the currency market. Currently, only one stock — KMG — is trading in positive territory. Defensive stocks like KEGOC and Kazakhtelecom have shown the least reaction to the market decline. While KZTK may soon face an internal trigger for a decline, KEGOC remains the most defensive instrument in the local market.
Currency. In addition to the KASE drop, the tenge also weakened noticeably. Given that the dollar has not risen globally and the ruble has remained stable, the tenge's fall to 520 per dollar seems either a reaction to falling oil prices or market panic. Since related currencies (DXY and USDRUB) have stayed relatively stable, this weakening of the tenge against the dollar may be short-lived.