Our comments and expectations
External Background:
The S&P 500 lost another 3% yesterday; however, the daily candle was green, indicating that the closing prices were above the opening prices. At the beginning of the trading session, the S&P 500 volatility index (VIX) reached 65 points, the highest since March 2020 during the peak of the market panic around Covid-19. By the end of the trading session, the VIX fell to 38.5, which is still quite high. Traders are betting that the economy is deteriorating so quickly that the Fed will have to start aggressively easing its policy. At the start of the decline, the swap market assigned a 60% probability of an emergency rate cut by the Fed within the next week, but then expectations were lowered. Notably, JPMorgan's trading desk stated that the exit from the tech sector may be "largely complete," and the market is "approaching" a tactical buying opportunity in stocks during the dip. In Europe, prices fell by about 2%, marking a correction over three consecutive sessions. During this period, the Stoxx 600 lost 6%, the DAX 6.3%, and the FTSE 100 4.3%. Yesterday's loser is becoming today's winner, as the Japanese Nikkei 225 rises by 10.2%. The Korean Kospi, which lost 8.8% yesterday, is up by a smaller amount today, at 3.3%. Chinese indices are slightly down, similar to yesterday's performance. In the commodity market, there are no positive shifts observed this morning. Futures for the S&P 500 are up by 1%.
Bonds:
The yield on 10-year U.S. Treasuries remained stable yesterday at around 3.8%. It seems that the market has begun to price in rate cuts ahead of the Fed.
KASE Index:
The KASE fell by 2.5% yesterday, mirroring the results of European and U.S. indices. Over two sessions, the market lost about 3.9%, erasing the gains made from mid-June to early July. Nevertheless, the index remained above the 5,000-point mark and did not break out of the summer sideways channel, which is positive considering the unpredictable and painful nature of this correction for global markets. Today, with the opening, we see a market rise, reflecting the movement of Asian indices and S&P 500 futures.
Index Stocks:
Most stocks showed a similar level of decline. KEGOC displayed the most pronounced defensive characteristics alongside Kcell. BCK and Kazakhtelecom performed worse than expected, while Kaztransoil fared better, losing only 1% given the negative background news. The main corporate event yesterday was the report from Air Astana, which can be considered neutral, although the main performance indicators improved in the second quarter. Revenue and other income for the second quarter increased by 13%, largely due to an 11.4% increase in passenger traffic to 2.2 million people. On the downside, there were one-time expenses, including costs related to the IPO and charitable contributions (associated with flooding). However, if these specific items are excluded, the company continues to show decent growth in line with the overall growth of the passenger transportation market in Kazakhstan.
Currency:
The dollar rose yesterday but hit the 480 tenge level and is currently around that mark this morning.