Our Comments and Expectations
External Background. The S&P 500 rose by 2.5% yesterday, reaching new record highs amid Trump’s victory and the Republican Party gaining a majority in the Senate. Bloomberg noted that this was the best post-election first-day reaction in the index's recorded history. Recall that Goldman Sachs previously forecasted a 3% rise in the index under the Republican Sweep scenario. The small-cap Russell 2000 index surged by 5.8%, driven by expectations that Trump’s protectionism would benefit smaller companies. The fear index, VIX, dropped to 16.3 points, the lowest level since September 27. The downside of Trump’s presidency could be rising government bond yields, alongside investor expectations for tax and tariff cuts, which would bring inflationary pressures and worsen the budget deficit. Today, the market is awaiting the Federal Reserve's meeting, where a 0.25% rate cut is projected. Another similar cut is expected in December, with a total of 1% reduction anticipated by 2025. In Europe, yesterday’s dynamics were interesting – prices opened strongly but ended trading in the red. European investors' confidence appeared to wane as Trump took the lead during the day. During Trump’s previous presidency, tariffs were imposed on Europe, and this time he may pause new permits for offshore wind farm construction projects. This morning in Asia, indices in Japan and South Korea showed neutral dynamics, while indexes in Hong Kong and mainland China rose. Investors expect that Beijing will focus on stimulating domestic demand to offset any potential negative impact of Trump’s return to the White House. Meanwhile, commodity markets have seen a noticeable decline in prices, particularly in copper and gold, due to the strengthening dollar. However, today copper has regained about a third of yesterday's losses.
Bonds. The yield on U.S. 10-year Treasuries reached 4.43%. U.S. high-yield bonds have been rising for the second session, correlating with other risk assets.
KASE Index. The Kazakhstan market welcomed Trump’s victory and the rise in U.S. stocks. KASE index prices rose by 1% and are close to their historical highs.
Index Stocks. The market continues to ignore the negative factor of rising U.S. Treasury yields. On the other hand, local stocks rarely exhibit immediate correlation with this benchmark. Among KASE index stocks, growth was noted in stocks dependent on the tenge exchange rate (banks) and one of the two exporters, Kazatomprom. BCC, KMG, and KazTransOil closed neutrally. Oil prices overall held up well yesterday, especially compared to declines in copper and gold prices. Meanwhile, our GDRs and ADS showed confident growth: Kaspi broke above the 50-day moving average and is now testing the downtrend, while Kazatomprom again exceeded the $39 mark.
Currency. The dollar is showing no gains against the tenge today and remains around the 492 mark.