After taking the spot of the world’s best-performing stock market in the world in 2017, the MSE Top 20 index has been consolidating the gains. The majority of the MSE blue chips stocks traded lower with bell weather APU losing 8%. However, coal miners had a great quarter with Khukh Gan leading the pack up 30% as coking coal export prices, to main trading partner China, have continued to soar. Further propping up the sector was positive news flow from coal miner Tavan Tolgoi, announcing revenue growth of 240% in 2017 and a dividend of 15%. Supported by favourable commodity prices and the backing of IMF, the economy is looking in good order and the Mongolian currency has continued to strengthen to the US dollar.

We believe that the market is in a consolidation phase and the market should be supported by positive news flow and improving investor sentiment as a number of IPOs are expected in 2018. Foreigners have largely been inactive on the exchange for a long period, but should this change we will see another boost of the MSE. Also, the stock market has been supported by the moves of the Bank of Mongolia, which has aggressively been lowering the policy rate. Less than two years ago, the rate was at 15%, and several cuts later we are now at 10% “based on creating favourable economic, financial and legal frameworks” according to the central bank. The average interest rate for the commercial banks are still high at around 20 %, but the central bank has a strategy in place to reduce those rates by 5-10%.

Domicile: Bermuda, Source: Bloomberg

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