Our comments and expectations
External backdrop. The S&P 500 rose 0.7% on Friday after a weak U.S. labor market report, which under current conditions is supportive for the market. In September, the economy created just 29k nonfarm jobs versus expectations of about 90k. The unemployment rate increased from 4.1% to 4.2%, and prior months’ figures were revised down. The report eased fears of an imminent Fed rate hike: the probability of the rate being kept unchanged in October rose to about 80%. However, expectations for further policy tightening remained, and the yield on 10-year U.S. Treasuries, after an initial decline, climbed again to 5.28%. Thus, the rebound in equities is not yet accompanied by a sustained improvement in the bond market. In Europe, the major indices added 0.3–1.2%. At the same time, the region’s inflation data came in worse than forecast: annual inflation in the eurozone accelerated from 3.2% to 3.8% versus expectations of 3.6%. The main contribution came from higher energy prices, while core inflation rose from 2.4% to 2.5%. This keeps pressure on the ECB toward further rate hikes. Over the weekend, OPEC+ agreed to keep target production levels unchanged for November. This morning Asian markets are moderately higher, except for Korea’s Kospi. S&P 500 futures are down 0.1%.
KASE Index. KASE continued to rise yesterday after breaking above a local descending trend line. Despite gains of 1% or more in index heavyweights such as Halyk Bank, Kaspi.kz, and Kazatomprom, the index’s total increase for the session was only 0.4%. As prices approach local resistance in the 7,860–7,900 range, the pace of gains may slow. In addition, yesterday’s performance of GDRs and ADS will not provide additional support to KASE today.
Index stocks. Kazatomprom gained 1.5% and returned to KZT 30,000. Its GDRs on the LSE, by contrast, fell 0.6% for the session to $64.2, although during the day they rose to $66. Uranium edged down slightly to $89.65 per pound. Kaspi rose 1% on KASE, while its ADS on Nasdaq were virtually unchanged, closing at $93.98. Slightly below current levels, the ADS are supported by the 100-day moving average around $93. Notably, the further rise in the U.S. market did not have a positive impact on the quotes. Halyk Bank also added 1% locally; however, its GDRs lost 1.2% to $33.05. HSBK GDRs and KSPI ADS are similar in that both securities are currently supported by the 100-day moving average. An interesting observation: over the session, the dollar strengthened against the tenge by 1.8%. When recalculated into dollars, local shares of all three companies also became cheaper. At the exchange rate from the table, Kaspi ADS ended the day about 1.2% cheaper than the shares on KASE, and Kazatomprom’s GDRs were 2.4% cheaper.
Currency. USDKZT rose sharply yesterday and began testing the resistance level around KZT 455. Today the test continues, but the pace of gains has slowed sharply. As of the time of writing, the dollar on forex is trading at KZT 455.3.