FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 62
MONGOLIAN STOCK EXCHANGE
LETTER FROM THE CHAIRMAN AND CEO
An increase in bond trading in 2002 has partly
compensated for the decline in share traded
value. In 2002 bond trading accounted for 97%
of the Exchange total securities market turnover.
By the end of November, there were 403
companies listed on the Mongolian Stock
Exchange (MSE) of which 74 were state
owned. Total market capitalization at this time
was US$ 31.9 million.
In 2002, 233 trading sessions were conducted
at the MSE and by the end of the year, bond
trading value reached US$ 40.3 million of
which 94.15% or US$ 37.9 million was
government bonds, 5.85% or US$ 2.4 million
was corporate bonds.
During this period share trading volume
reached 9.8 million shares with a trading value
of US$ 1.2 million, a decrease of US$ 0.4
million from the previous year. The share
trading value has continuously decreased.
There are many reasons for this. First is the
adverse effect on equity turnover brought on
by the completion of voucher privatization.
This has led to high ownership concentration
and a significant decrease in the demand and
supply of shares. The result of secondary
market activity to date is that stockholdings
in Mongolia’s listed companies have become
highly concentrated. 74.0% of the stocks from
329 listed companies fully owned by private
stockholders are owned by 1,262 individuals.
Secondly, in 1996 the government policy for
privatization changed toward a preference for
the auction method. Since 1996 the
government has continued the privatization
process by selling its stakes in partly privatized
companies by auction conducted by the State
Property Committee. This method reduced
new issues of shares by the government
through the MSE and caused trading volume
to seriously fall off and the value of shares in
the Exchange declined. And lastly, a generally
unfavorable market climate caused by high
real interest rates, low household savings
rates, high inflation and unemployment and
weak financial sector development have
influenced the activity on the equity market.
An increase in bond trading in 2002 has partly
compensated for the decline in share traded
value. In 2002 bond trading accounted for
97% of the Exchange total securities market
turnover. Reasons for the increase were the
demand in government budget expenditures
and the high differences between deposit
(savings) and lending (loan) interest rates of
commercial banks.
This year the state has started to take the
securities market development into
consideration. As a result, revisions to the
Securities and Exchange Law have been
adopted by the Parliament in December 2002,
which we believe will make a better
contribution to the future development of the
securities market.
Dulamsuren Dorligsuren
Chairman and CEO
HISTORY AND DEVELOPMENT
In 1990, the public sector in Mongolia, as in other
post-communist countries, accounted for
approximately 90% of the GDP. With a view to
reducing this share, the Government adopted a
sweeping privatization program in mid-1991 and
the Parliament passed a wide range of laws and
regulations to improve the legal basis for capital
ownership. The privatization of state-owned
enterprises was regarded as “the center of the
reform program,” and many senior government
officials regarded this as the program’s most
important achievement. Ultimately, the
Privatization and Companies Law was passed in
June 1991.
The MSE was created in 1991. In the first phase,
from February 1992 to August 1995, the MSE
operated as a mechanism of voucher distribution
(blue coupon privatization of big enterprises).
During this period until the first half of 1995, the
MSE traded shares of 470 companies worth US$
40.9 million, and traded 1.5 million blue vouchers
and 1.4 million pink vouchers received from over
460,000 people.
During the second phase, beginning in August
1995, the MSE assumed the role of a regular
stock exchange. In September 1995, the
Parliament adopted the Law on Securities and
set up the Securities Committee (SEC). Following
this law, other regulations were issued
FUTURE OUTLOOK
Plans are to:
improve the government bond trading system;
develop a corporate bond market;
strengthen listing requirements and criteria for
currently listed companies; and
strengthen cooperation with the Taiwan Stock
Exchange.
throughout 1995 reorganizing the MSE as a non-
profit entity, privatizing brokerage houses,
providing financial resources for the Exchange’s
development, and clarifying rules regarding the
distribution of dividends.
Also in 1995, the Mongolian Association of
Securities Dealers and Brokers was organized.
The Association is a self-regulatory non-
government organization with 41 members,
consisting of legal entities and individuals
licensed to participate in the securities market.