Our comments and expectations
External backdrop. The U.S. market ended Thursday lower: the S&P 500 lost 0.4% to 7 592.40 points, while the Nasdaq and Dow Jones also retreated by about 0.4%. Pressure on the technology sector came from Jensen Huang’s resignation as Nvidia CEO: the company’s shares closed the session down about 4%, recouping a significant portion of the initial losses. In Europe, the Stoxx 600 added 0.1%, the DAX gained 0.4%, and the FTSE 100 rose 0.3%. An additional source of pressure in the second half of the session was a weak auction of 30-year U.S. Treasuries for $25 bn: the bid-to-cover ratio fell to 2.36 versus 2.54 a month earlier, and the notes were placed at a yield slightly above what the market had expected. This increased pressure on bonds amid Fed officials’ statements about the need for further rate hikes. The 10-year UST yield rose by about 10 bps to 5.10%. Thus, the deterioration in equity sentiment was accompanied by a repricing of borrowing costs and a decline in demand for long-dated sovereign debt. Brent crude rose 3.3% to $95.82 per barrel after Donald Trump said the U.S. was no longer interested in a deal with Iran. The return of a geopolitical premium to oil prices heightened inflation concerns and added pressure to bonds. Against the backdrop of rising yields and a 0.3% strengthening in the DXY, gold fell 2.9% to $3 885.30 per ounce.
KASE Index. The KASE Index had a fairly calm session yesterday. Volatility was minimal, and price changes for most stocks at the close did not exceed 0.3%. Trading volumes also fell to their lowest since October 16, amounting to KZT 560 mn. We saw more pronounced moves in external markets, which may weigh on local trading today.
Index stocks. The biggest decline among all securities was in Air Astana GDRs, which may be a reaction to the company’s financial report. Air Astana (+0.3%) delivered mixed third-quarter results. Total revenue and other income rose 20.6% y/y to $529.1 mn, but EBITDAR was virtually unchanged at $105.6 mn and its margin fell from 24% to 20%. Net profit decreased 10.3% to $18.5 mn. The main issue remains: costs per unit of available capacity rose 20%, outpacing the 16% increase in unit revenues. That said, for the sake of fairness, we note that this gap has been narrowing for the third quarter in a row. The situation with defective engines also improved somewhat, as downtime for repairs declined significantly. At the same time, passenger traffic increased by only 0.9%, while the load factor fell from 85% to 83.4%. In our view, revenue growth looks encouraging, but even the peak season has not yet delivered a recovery in profitability—an improvement in the company’s valuation will require a slowdown in unit cost growth. The strongest gain was posted by BCC shares: quotes retested the resistance level of KZT 5,580. A breakout could signal a continuation of the rally. On the LSE, Kazatomprom’s GDRs fell 0.8%, which is significantly less than the losses of uranium companies’ shares in the U.S. market. Most likely, trading on the LSE ended earlier than the sell-off in the uranium ETFs URA (−3.8%) and URNM (−5%) began, so we expect pressure on the GDRs during the current session.
FX. Yesterday the dollar continued to weaken against the tenge and dipped slightly below KZT 444. USDKZT quotes will likely continue to decline toward the trend line around KZT 441.5 or toward the September lows near KZT 439.
En