Our Comments and Expectations
External Background.
The S&P 500 closed flat after losing momentum in the final minutes of the session. Previously, markets had been under pressure due to concerns over tax legislation and the resulting bond sell-off. On the index map, stocks of megacap companies like Tesla, Google, and Amazon performed well. Donald Trump’s tax bill is facing amendments and delays in the Senate after being narrowly approved by the House of Representatives. Meanwhile, business activity and output expectations in the U.S. improved this month amid easing trade-related worries: the S&P Global Flash Composite Output Index for May rose by 1.5 points to 52.1. U.S. jobless claims fell to 227,000 — a four-week low — signaling continued labor market strength. In Europe, indexes declined by 0.5–0.6%. The Eurozone’s composite PMI unexpectedly fell to 49.5 in May. The manufacturing sector outpaced the services sector for the first time since the pandemic. In the UK, the PMI posted a modest rebound to 49.4 in May. Early morning results are rather muted, with major indexes trading in near-neutral territory. In Japan, the key inflation metric accelerated at its fastest pace in two years, driven by rising food and energy prices. Oil declined to around $64 per barrel.
Bonds.
The yield on 10-year Treasuries fell after rising the previous day. Yields on longer-dated securities are also declining.
KASE Index.
Yesterday, the KASE index experienced a sell-off in Kazakhtelecom shares, dropping by 2%. However, this had no major impact on the technical outlook, although it pushed the index slightly further from the 5700-point level.
Index Stocks.
After a 31% drop yesterday, Kazakhtelecom shares are down another 19% today. As previously noted, many investors were unable to sell due to a trading halt, making the decline in the new session expected. At the time of writing, the total drop has reached 43%. We had previously forecast a 40% fall, so any further losses could be viewed as overselling. Despite this sharp decline, the KASE index opened up 0.3% today, supported by gains in stocks like Air Astana (+1.2%), BCC (+1.6%), Kcell (+1%), and Kazatomprom. The positive performance of other stocks likely indicates a redistribution of funds following yesterday’s KZTK sell-off. A similar effect may occur when dividends are credited to the accounts of current and former shareholders. Meanwhile, foreign markets showed lackluster performance: Kazatomprom GDRs fell 1.1%, and Halyk Bank GDRs declined 0.4%.
Currency.
The U.S. dollar is rebounding this morning after two sessions of losses. The USDKZT exchange rate has returned to the 511 level and to its 50-day moving average.