It was a tough quarter for Mongolian assets. More or less all the constituents in the MSE Top 20 Index experienced sharp declines with blue chips Tavan Tolgoi (-26%) and Apu (-13%) leading the way down. The currency lost around 3% in line with the developing market currency sell-off.  Offshore stocks were led lower by heavyweight Turquoise Hill Resources (-25%). The company has, in 2018, been reporting earnings in line with or above expectations, but a weaker copper price and a general sell-off in perceived risky assets seem to have taken its toll.

The Mongolian economy is growing at around 5% and recent numbers for the first nine months of 2018 show that export growth was healthy at 15.3%.  Mineral products, textiles and textile articles, natural or cultured stones, precious metals, and jewelry make up over 95% of total exports.

The Mongolia Stock Exchange (MSE) has for many years been marred with liquidity issues. Structural progressive changes are underway and as the latest move, the MSE sent out a warning to 130 companies whose shares do not meet liquidity requirements. Most of these companies were listed during the state privatization that took place in the 1990s, and only a minor percentage of their shares were listed on the exchange, which has been problematic for market liquidity and shareholders´ rights. But the biggest impact for the MSE would be the long-awaited IPO of the giant Erdenes Tavan Tolgoi (ETT) – Mongolia’s largest coal miner. ETT has one of the world’s largest untapped coking and thermal coal deposits and a listing would create a flurry of interest for Mongolia.

Domicile: Bermuda Source: Bloomberg, BDSec JSC