FMG Mongolia Fund lost 3.8% in the 1st Quarter of 2017
Local stocks were on a roller coaster in the first quarter but ended 3% higher mainly due to FX strength. This improvement came on the back of a negotiated IMF stabilization package in February. The bailout was much needed as the government had been overspending for years as lower commodity prices resulted in declining revenues from exports. The IMF deal boosted investor confidence and helped in a successful debt swap of the $580 mn bond due 2017 issued by Development Bank of Mongolia.
The best performing stock in the fund was a coal mine listed on the MSE, rallying 45%. With coal export prices to China on the rise the company has wind in its sails. During the first two months of 2017, Mongolia exported minerals worth $728mn, an increase of 57% YoY. Coal export volume increased by a stellar 235% YoY.
Asian Development Bank presented its annual Asian Development Outlook 2017 where they forecast “In Mongolia, GDP growth will accelerate this year to 2.5% on large mining investments, and moderate to 2% in 2018 as coal production reaches full capacity. Large ongoing mining projects are expected to turn the balance of the fiscal budget and the balance of payments into surpluses in the years ahead”. IMF on the other hand believe that Mongolia can likely look forward to 7-8% economic growth once it rebounds from its economic troubles.