The market is preparing for the dividend gap of Kazakhtelecom shares

Our Commentary and Expectations

External Background. The rally in the S&P 500 has stalled, which is not necessarily a negative sign, as the typically weak May is unfolding quite favorably. Traders are now focused on tense U.S. budget negotiations centered around rising deficit spending. Donald Trump has rejected Republican demands to significantly increase federal and local tax deductions in the bill. This is being described as a negotiation deadlock, as Republicans are pushing for swift passage of a major tax cut bill. In corporate news, Elon Musk stated that he intends to remain CEO and will reduce his political spending going forward. European markets showed more confidence — the Stoxx 600 rose by 0.7% and continues its rally since April, with a total gain of +17.9%. Analysts at JPMorgan and Citi expect U.S. stocks to underperform European ones this year by the widest margin in at least two decades. JPMorgan forecasts a decline in the S&P 500 this year, while now projecting the Stoxx Europe 600 to rise another 5%. In Asia, indexes in China, Hong Kong, and South Korea were up in the morning, while Japan’s market saw a decline. Oil rose 0.8% following CNN reports that, according to U.S. intelligence, Israel is preparing for a potential strike on Iranian nuclear facilities.

Bonds. The yield on 10-year U.S. Treasuries stood at 4.48% yesterday. According to Bloomberg, citing informed sources, the U.S. credit rating downgrade by Moody’s increases the risk of forced sales of Treasury bonds by Hong Kong pension fund managers.

KASE Index. The KASE index had a strong session yesterday, with four stocks rising more than 1%.

Index Stocks. Gains of over 1% were seen in BCC, Kcell, Kaspi, and KazTransOil. Meanwhile, Kaspi's ADS fell by 3.8% on Nasdaq, losing the positive momentum of the previous two sessions. GDRs of Halyk Bank also showed a moderate pullback. The bank’s earnings report was positive, showing strong growth in quarterly net profit and net interest margin compared to last year. In our valuation model, we updated the financial indicators based on the report, improved the forecast for interest income, loan portfolio, and deposit growth, and raised our target price for the stock to 390 KZT from the previous 365 KZT.

Considering the T+2 settlement cycle, we expect that Kazakhtelecom shares will begin to sell off tomorrow as the dividend record date approaches. It’s hard to estimate the exact decline, but theoretically it could match the size of the dividend payout. This implies that total losses may reach –40%, though likely not in a single session, as a sharp drop could trigger a trading halt.

Currency. USDKZT is trading at 510 today. The tenge has shown slight strengthening against the dollar amid a three-session decline in the DXY index. However, no major changes are observed in the broader picture.