Our Commentary and Expectations
External Background. The S&P 500 interrupted its impressive 9-session winning streak. Quotes declined by 0.6% but remain above the 50-day moving average. Recent economic data appears to have eased recession concerns. The services sector PMI business activity index rose by 0.8 points to 51.6 in April, while the prices paid by businesses for materials and services reached the highest level in more than two years, indicating growing inflationary pressure. Investors will now turn their focus to the Fed’s actions on Wednesday. Bond traders are lowering expectations for policy easing. In Europe, the Stoxx 600 closed flat, but the DAX rose by 1.1%. Notably, the German index was the first among major global benchmarks to fully recover in a V-shaped form after April’s global market sell-off. Quotes need to rise just over 0.3% to reach new all-time highs, though European index futures are showing a slight decline at the moment. In Asia, only the Hang Seng Index, up 0.7%, and mainland China’s CSI 300, up 0.9%, are trading in the morning. KASE index futures are down 0.3%. Oil is trading at $61.3, up 1.6%.
Bonds. Yields on 10- and 2-year U.S. Treasuries continue to rise as expectations of Fed policy easing decline.
KASE Index. The KASE Index had a strong session yesterday, reaching its highest level since January 27 of this year. The surge was driven by shares of Kazakhtelecom and Kaspi.kz.
Index Stocks. Kazakhtelecom shares soared 15% after a dividend recommendation was announced in the materials for the upcoming AGM on May 15. Investors are to be offered 6,741.14 tenge, representing 100% of net profit for 2024. An additional 19,923.74 tenge will be paid from retained earnings, totaling 26,664.88 tenge, which implies a dividend yield of 52.8% as of the day before the materials were published. The record date is set for 00:00 on the second Sunday after the AGM, which falls overnight from Saturday, May 24 to Sunday, May 25. It’s important to note that the decision has not yet been made, and Kazakhtelecom is known for sometimes postponing or canceling dividend payments. We also believe that the positive impact of this news will be short-lived: although not all profits from the Altel/Tele2 sale will be paid out and some will go toward development, this is a one-time event. Afterward, the share price may drop significantly, especially given Kazakhtelecom’s lower income following the sale of its two profitable operators. As for other names, Kaspi.kz shares jumped by 4.8%, but part of that gain is being corrected today with a 2.3% decline. Kazakhtelecom shares are rising another 8.54% at the open today.
Currency. The dollar reversed sharply against the tenge during yesterday’s session. USDKZT, which initially rose to nearly 520 tenge, ended the day down at 516, and this morning is trading at 514.3 tenge.