Our comments and expectations
External background. The S&P 500 opened yesterday with a 2% decline but partially recovered during the session, finishing the day at -0.8%. The trigger for the recovery was Trump himself, who agreed to delay the imposition of 25% tariffs on Mexico for a month after speaking with President Claudia Sheinbaum. This move marked a sharp shift in the escalation of the trade war. In return, Mexico will send 10,000 soldiers to the border to curb the flow of fentanyl and illegal migration into the U.S. Furthermore, Trump stated that he had discussed the situation with Justin Trudeau, after which the Canadian Prime Minister announced the temporary suspension of U.S. tariffs on Canadian goods. The largest drop in the S&P 500 index was seen in technology sector stocks, mega-cap companies, certain financial securities, and industrial companies. In economic news, factory activity in the U.S. last month exceeded expectations, with the manufacturing ISM index reaching 50.9, surpassing the growth threshold for the first time since 2022. In Europe, there was a partial recovery of quotations. Inflation in the Eurozone unexpectedly accelerated last month to 2.5% year-on-year, compared to 2.4% in December. In the morning, significant growth of Hong Kong's Hang Seng index by 2.2% was observed after Trump's announcement of plans to hold talks with China, increasing the likelihood of delaying the imposition of a 10% tax. Oil is testing its 50-day moving average this morning.
Bonds. The yield on U.S. 10-year bonds was 4.54% yesterday. Corporate bonds decreased moderately.
KASE index. The new phase of the trade wars had a more significant impact on the local market than expected. Usually, the KASE index is less sensitive to external negative or positive triggers, but this time, the prolonged decline wave observed since mid-January may have affected investors' behavior. On the other hand, Trump’s actions and his delay in imposing tariffs seem to point more toward a scare tactic than an attempt to inflict real damage on global markets, including the U.S. Based on this logic, today the KASE index may recover, especially since it has fallen to the level of its long-term upward trendline.
Index stocks. Most of the stocks in the index have been “under attack.” Neutral results were shown by Kazatomprom and defensive KEGOC. The leader in the decline was Kazakhtelecom, which had already experienced a correction after a period of growth. The external negative background amplified the decline, leading to a 4.2% drop. The growth leaders of the first half of January, BCC and KMG, are also being corrected. After the market opened, there was a slight increase in these stocks. Despite the volatility of KASE stocks, trading in GDRs and ADS was unexpectedly calm.
Currency. The DXY index reached its highest levels since January 13 yesterday but sharply reversed after the tariff delay announcement. However, this morning it is rising again against global currencies but slightly decreasing against the tenge, to 521.4 tenge per dollar.