Our comments and expectations
External backdrop. On Tuesday, the S&P 500 rose 0.4%, the Nasdaq gained 0.8%, while the Dow Jones fell 0.4%. U.S. equities were supported by technology, industrial and communications companies. Trading took place ahead of the results of the U.S. midterm elections. The yield on 10-year USTs increased by 6 bps to 4.95%. European markets closed lower: the Stoxx 600 lost 0.6%, the DAX 0.4%, and the FTSE 100 1.1%. Brent crude fell another 0.7% to $103.60 per barrel. Pressure persisted amid diplomatic efforts to resolve the conflicts around Iran and Ukraine: the market continued to reduce the risk premium for supply disruption, although no final agreements have been reached yet. Gold declined 0.7% to $3 940.4 per ounce. This morning, the external backdrop deteriorated again. According to Reuters, Democrats won majorities in both chambers of the U.S. Congress, heightening investor concerns about tighter regulation of the technology sector. U.S. index futures and Asian equities were down, with the Nikkei losing about 3%. At the same time, demand for Treasuries increased, and the dollar weakened against major currencies.
KASE Index. The Kazakh market partially recovered after Monday’s decline: the KASE Index added 0.3% to 7 891.47 points, not continuing the prior session’s correction. KazTransOil and Kaspi.kz led the gains. At the same time, the performance of overseas depositary receipts remained mixed, limiting confidence in the recovery continuing.
Index constituents. KazTransOil jumped 2.5% after falling 2.8% in the previous session. Support came from news that pumping via the Atyrau–Samara oil pipeline resumed after a technical inspection. Recall that the earlier decline was caused by a halt in transit. To our knowledge, this is the first case in which the Russia–Ukraine conflict has directly affected oil transportation by KazTransOil. Kaspi.kz rose 1.4%; however, its U.S.-listed shares fell 1.3%. It appears it is still too early to speak of a breakout above the 50-day average and the start of a new upward wave in the stock. The current dynamics rather indicate the continuation of a sideways trend between the 50- and 200-day moving averages. Halyk Bank also rose on KASE (+0.5%) but fell on the LSE (−1.8%). The quotes have almost dropped to support levels, which are slightly above $32.2. Kazatomprom added 0.4%, reporting moderately positive operating results. Group sales in Q3 increased 25% y/y, and the average realized price rose 18%. This supports our previous thesis about the impact of delivery schedules on quarterly dynamics. At the same time, volume growth does not yet prove a recovery in profitability: the MET and strong tenge risks we highlighted after the half-year results remain. The company confirmed its full-year guidance, so there is still insufficient basis to revise the valuation solely on this report. The London GDRs did not react positively and lost 1.5%, underperforming uranium ETFs URA and URNM. On the AIX, Solidcore lost 0.9%; however, the stock has some hope for support from gold: its price has been rising confidently by 2.4% this morning, and is up 3.5% over the last three sessions.
FX. USDKZT is showing relatively high volatility on the forex market today. At the moment, the dollar is trading at 452.9 tenge, i.e., without significant changes. However, the daily candle shows that quotes dropped to 451 tenge today. Recall that in November the NBK plans to sell foreign currency for 302 bln tenge as part of mirroring gold purchases. An additional source of supply will be $910 mln bought from the National Fund, although the schedule for their sale depends on market conditions. FX purchases for the UAPF in October totaled $568 mln; the amount for November has not been announced. These operations support the tenge through FX supply, but their overall net balance is still unknown.