Our comments and expectations
External backdrop. The S&P 500 rose 0.7% on Friday after a weak US labor-market report, which in the current environment is supportive for the market. In September, the economy added only 29k nonfarm jobs versus expectations of around 90k. The unemployment rate increased from 4.1% to 4.2%, and prior months’ data were revised downward. The report eased fears of an imminent Fed rate hike: the probability of the rate being kept unchanged in October increased to about 80%. However, expectations of further policy tightening remained, and the yield on 10-year US Treasuries, after an initial decline, climbed back to 5.28%. Thus, the rebound in equities is not yet accompanied by a sustainable improvement in the debt market. In Europe, major indices gained 0.3–1.2%. At the same time, domestic inflation data came in worse than forecasts: annual inflation in the euro area accelerated from 3.2% to 3.8% versus expectations of 3.6%. The main contribution came from higher energy prices, while the core measure rose from 2.4% to 2.5%. This keeps pressure on the ECB in favor of further rate hikes. Over the weekend, OPEC+ agreed to maintain target production levels for November. This morning, Asian markets are moderately higher, with the exception of Japan’s Nikkei 225. Oil is slightly lower, to $101.4 per barrel. S&P 500 index futures are down 0.1%.
KASE Index. KASE rose 0.7% on Friday, rebounding after the previous day’s decline. The advance was broad-based: almost all stocks in the representative list rose, except Halyk Bank, which ended the session virtually unchanged. From a technical standpoint, a positive development was the breakout above the local downtrend on increased volumes. Here, it is also worth noting the correlation between the KASE Index and the USDKZT exchange rate: since early August, quotes have been moving in a similar direction, indicating that tenge strengthening had a negative impact on the index. Today, we expect the rally to continue thanks to a strong close on Friday for the GDRs and ADS.
Index stocks. Air Astana was the top gainer, adding 2.8% to 683.84 tenge. At the same time, its GDR on the LSE remained at $6.02, i.e., there was no comparable move in London. KazTransOil rose 2.2% to 1322 tenge, notably outperforming other oil names. Today, we expect other large stocks such as HSBK, KSPI, and KZAP to move into positive territory as well, as they posted solid gains on foreign venues on Friday. Since their weight in the index is higher than that of the advancing Air Astana and KazTransOil, a continued market rise can be expected. Halyk Bank gained 2.9%, bouncing off the 100-day moving average and recouping half of Thursday’s losses. Kaspi, thanks to a 2.2% increase, held key support levels and even remained within the ascending channel. A breakout of the local downward trendline has not yet been confirmed; however, if the rise continues, the quotes will have significant local upside potential, as they are currently near the lower boundary of the ascending channel.
FX. USDKZT is rising for the third session in a row and today reaches 450.5 tenge. The rebound occurred after reaching our target at 439 tenge. Strong resistance levels are in the 454–455 tenge area.