FMG Mongolia Fund gained +45.6% in the 3rd Quarter of 2017
This was THE quarter for Mongolia. Hard commodities remained bullish and the Mongolia Stock Exchange was on fire. The rally which started in July was initially led by the two heavyweights TTL and APU, but they were later joined by select mid-cap stocks such as dairy producer Suu (+16%) reporting a strong increase in production levels, and the cashmere producer Gobi (+27%). Offshore listed Mongolian companies joined the rally, and bell weather stock Turquoise gained a solid 17%.
APU, the largest position in the fund, was on a roll. In July the company announced that it was merging with Heineken’s Mongolian business which was APU’s biggest competitor in the domestic market. The deal with Heineken will catapult APU to the next level as a regional player and exporter of Mongolian brands such the Chinggis Khan vodka. The demand for APU was further supported by solid 6M17 earnings results with net income growing by 63%. Despite the sharp move in the stock, it is an attractively valued company in an attractive position.
Big moves were also registered on the political side of things as U.Khurelsukh was appointed as the 30th Prime Minister of Mongolia after parliament voted to oust Prime Minister Erdenebat. The new Prime Minister is market-friendly and will focus his efforts on growing the economy. The GDP growth (+5.3% for 1H17) has recently exceeded expectations on the back of strength in the commodity prices and output, but the growth outlook has been bleak, so the new Prime Minister could set Mongolia on a different path.