FMG Mongolia Fund lost 7.2% in the 2nd Quarter of 2017

The MSE slowly inched higher through the quarter. On a stock level though, volatility was high with performance discrepancy. The fund performance was boosted by exposure to local mining stocks and a bakery. The performance was also boosted by a further appreciation of the currency. On the back of the IMF deal, the Tugrik has now strengthened by 5% in 2017 in a convincing way. On the other hand, the offshore listed Mongolian companies all finished deep in the red, as well as the local brewer APU, having a great negative impact on the performance of the fund. However, the fund´s core holding, Turquoise Hill Resources, has been reporting solid progress so operationally the company is in good shape, and we expect the share price to firm up from its low levels.

A number of key economic indicators are showing signs of strength, so the future is looking brighter than in many years for Mongolia and the fund is positioned to reap the full benefit of a re-rating in Mongolia assets. First quarter GDP growth was clocked at 4.2%. Total foreign trade turnover increased 36% y-o-y as coal exports have ballooned and imports of fuel, equipment and vehicles increased. In the first 5 months of 2017, Mongolia exported minerals worth US$ 2bn, up more than 50% from the same period in 2016. The tax revenue increase by 22.8% compared to the same period of the previous year as several taxes have been raised as per the IMF deal.

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