Our comments and expectations
External backdrop. The S&P 500 fell 0.2% on Friday. The focus was on weak consumer-demand data. U.S. retail sales unexpectedly dropped 0.6% in July, the steepest decline in more than a year. The University of Michigan consumer sentiment index for August fell to 51 points versus a median forecast of 55 among economists surveyed by Bloomberg. The negative impact of this data was partly offset by the fact that any economic cooling supports overall monetary-policy easing and, in particular, a more dovish Fed decision at the September meeting. This morning, the news remains discouraging: Israel is carrying out serious strikes on Lebanon, increasing pressure on U.S.-Iran talks. Oil is trading around $89 per barrel this morning, while S&P 500 index futures are up 0.17%.
KASE Index. On Friday, KASE pulled back by 0.8%, which is a notable correction for the relatively low-volatility Kazakh market. The decline began after the index reached 8,000 points and the RSI entered overbought territory, rising to 82. Apparently, seeing signs of momentum exhaustion—about which we warned in the previous review—investors began taking profits in the two strongest names recently: Kaspi and Kazatomprom.
Index stocks. Kaspi fell 4.6% on the local market. If we compare the securities on the two exchanges, after this drop the ADS and the ordinary shares have almost converged in price, as Friday’s losses were largely driven by the FX difference that had previously accumulated in local-market quotations due to the tenge’s strengthening. Nevertheless, this indicates that investors are no longer willing to tolerate FX upside in shares that have paused their advance on Nasdaq. Note an important point: the weakening of the upward momentum in this case is expected and quite logical, so the 0.9% decline in the ADS over two sessions does not suggest that longer-term technical triggers have been broken. We believe the current movement in the ADS reflects only the local nature of volatility and does not yet negate the fact that the shares remain in an ascending channel. On the Kazatomprom GDR chart, we also see a similar picture in the form of a local weakening after reaching the $76.8 resistance level. However, the shares remain above previously broken key support levels. In addition, uranium prices continue to rise slowly but steadily. At today’s market open, we see Kazatomprom up 1.7%, confirming the local nature of Friday’s sell-off.
Currency. After the final break of the 466 tenge level, the dollar lost buyer support and is now declining toward 462 tenge. The national currency now has a chance to reach the April highs around 455-458 tenge. Note that the dollar itself is currently weakening in global markets, as seen in the DXY index, with which the tenge has developed some correlation over the past few months. Also note that the ruble continues to fall against the dollar to 85 and to 5.42 against the tenge today.