Our comments and expectations
External backdrop. The S&P 500 fell 0.6% yesterday, marking a fourth consecutive down session. Pressure from oil and the debt market is intensifying: Brent rose 6.3% to $107.6 per barrel, while the yield on 10-year US Treasuries moved closer to 5%. The latest jump in oil is linked to the Houthis’ advance in Yemen and threats to supplies through the Red Sea. Reports say that Saudi Crown Prince Mohammed bin Salman called Trump twice yesterday, urging him to begin strikes on the Houthis, but he refused. As a result, risks to oil exports are expanding beyond the Strait of Hormuz. Last month, the country’s oil production volume declined again, reaching the lowest level since 1990. The yield on 10-year Treasuries is already edging very close to 5%. The US government debt buyback totaled $5.19 bn, falling short of the maximum level of $6 bn. The market-implied probability of a Fed rate hike next week has risen to about 70%. Next, investors are awaiting inflation data that are important for both the market and the Fed. Headline consumer price inflation (CPI) is expected to rise 0.4% due to higher gasoline prices. Core inflation is forecast to slow to 2.4% y/y. In Europe, indices also fell by 0.6–0.8%. As expected, the ECB raised the deposit rate by 25 bp to 2.5%, but concerns about further policy tightening remain. This morning, sentiment in Asia is negative: the Kospi and Nikkei 225 are down 1.8–1.9%. Oil has retreated to $106 after yesterday’s rise to $109 per barrel for Brent. S&P 500 futures are up 0.3%.
KASE Index. KASE fell noticeably yesterday by 1.3%. The index broke through a local support level around 8030 points and moved closer to the round 8000-point mark. The market is now showing a direct negative impact from external venues, as the decline is mainly in stocks traded on Western exchanges and lacking their own specific news triggers for a sell-off.
Index stocks. Kaspi lost 5.3% on KASE yesterday, while its ADS on Nasdaq fell another 2.9% to $97.15. Over two sessions, the decline in the receipts amounted to about 9.4%. The move is taking place amid weakness in the US market and dividend-related events; however, small quarterly dividends in terms of yield are unlikely to have caused such a steep drop on their own. The quotes fell straight to the 50-day moving average, as well as to one of the Fibonacci levels. In the medium term, the shares are doing what we feared: correcting to the lower part of the rising channel after recently reaching its upper boundary. Today, it will be important to make sure that prices can hold at the current support levels. Kazatomprom fell 2.4% on KASE, and its GDR on the LSE dropped 3.2% to $71.5. Further declines were also contained by the 50- and 100-day moving averages. Somewhat frustrating remains the fact that the shares once again moved away from the $76.7 level, a breakout above which would have opened up good technical upside opportunities.
FX. USDKZT is stabilizing today after yesterday’s dip. Judging by the candle on Forex, during the session the dollar fell to 447.6 tenge. Today, quotes remain around 450.6 tenge without pronounced volatility.