Our Comments and Expectations
External Background: Tuesday’s trading session was moderately negative for global markets. All the indices we monitor in Asia, Europe, and the US showed declines. The S&P 500 opened lower and spent the rest of the day in a sideways trend. The biggest losses were seen in the Russell 2000 index, which tracks small-cap companies. Dow Jones fell by 0.61%, marking its 9th consecutive session of decline, the longest losing streak since 1978. UnitedHealth Group had the most significant impact on the index, with its stock falling due to tragic events surrounding the company’s CEO. The market is awaiting the Fed's December meeting, which will be the last of the year. A quarter-point rate cut is expected, but predictions for the following months vary. Brian Moynihan, CEO of Bank of America, stated that the Fed is likely to reduce interest rates to 3.75% — a further three basis points. Meanwhile, US retail sales in November grew at a strong pace, driven by a surge in car purchases and robust online shopping, which hid more mixed spending patterns in other sectors. US industrial production unexpectedly declined for the third consecutive month in November, impacted by weaknesses in the utility sector and mining industries. In Europe, both the DAX and Stoxx 600 indices ended their 3–4 session winning streaks with losses. In Asia, Chinese and Korean indices showed moderate gains, while Japan’s Nikkei 225 showed a slight decline. Oil prices dropped for the second consecutive day, while copper fell for the sixth session in a row, as China’s economic data raised concerns about demand.
Bonds: The yield on 10-year US Treasury bonds rose at the beginning of the session but later declined to neutral levels.
KASE Index: The KASE index halted its decline yesterday and ended the day neutrally. However, this does not improve the situation, as the market may face pressure from weakness in global stock markets today.
Index Stocks: The biggest gainers yesterday were the shares of Halyk Bank. The stock price movement is following LSE trends with a one-session delay. Today, the correlation will likely be less pronounced due to the low volatility in GDRs during the previous session. We expect the stock to recover and start testing the $19.5 level on the LSE again, as it remains one of the most attractive on the local market, especially considering the P/E multiple. The biggest declines on the market were in the stocks of Kaspi and Kazatomprom, which also followed their counterparts on other exchanges. Kazatomprom gained 2% on the LSE yesterday, which could indicate the beginning of a recovery after the recent wave of declines.
Currency: The 525 tenge per US dollar level seems to be a strong resistance for the USD. The tenge has strengthened from this level for the second time.