MONGOLIAN STOCK EXCHANGE
Dulamsuren Dorligsuren
Chairman and CEO
Revisions to the
Securities and Exchange
Law brought a number
of changes in the status
of the market
participants.
Revisions to the Securities and Exchange Law,
adopted by the Parliament in December 2002,
brought a number of changes in the status of
the market participants, a minimum in the
amount of equity, and the responsibilities of the
Exchange. For example, these revisions stated
that the Mongolian Stock Exchange (MSE)
would become a profit-making entity, the
minimum amount of equity to be not less than
1 billion tugrugs (US$ 0.9 million). Brokers and
dealers are to set an equity amount of more
than 50 million tugrugs (US$ 0.04 million). This
resulted in a decrease in the number of
securities companies in compliance with the
new regulations from 34 to 26 or a 30%
decrease from the previous year.
The government of Mongolia has been working
to implement its goals to support foreign
investments, especially in the areas of
infrastructure, construction and mining.
During 2003 there were no significant changes
in the MSE listing criteria and securities trading.
Improvements to the system are currently being
made.
In October 2003 the MSE was divided into two
independent organizations: one in charge of
securities trading, and the other in charge of
securities clearing, settlement and depository.
Proper ties via new programming between the
two organizations are planned.
HISTORY AND DEVELOPMENT
FUTURE OUTLOOK
During the transitional period from a central
planned economy to a market economy in
Mongolia, many social and economic changes
were made, such as the establishment of new
relations, new entities, new productions and
services. Two of those changes were the
founding of the MSE on 18 January 1991 by
government resolution and the initiation of the
privatization process. With the start of secondary market activity,
shares of more than tugrugs 38 billion (US$
32.53 million) were traded during 1996-2003.
Since the inception of government bond trading
in 2000, and corporate bond trading in 2001, to
date government bonds valued at tugrugs
105.4 billion (US$ 90.2 million), and corporate
bonds valued at tugrugs 6.9 billion (US$ 6.0
million) have been traded.
According to the privatization policy adopted by
the government in 1992-1995, 96.1 million
shares valued at tugrugs 8.2 billion (US$ 7.0
million) of 475 state-owned entities were traded
by the MSE. The new Securities and Exchange Law,
adopted by Parliament in December 2002,
declared the MSE to be a business entity,
allowing it to carry out legal business services.
The Securities and Exchange Law was passed
in 1994 and the Corporate Law in 1995 resulting
in the establishment of the secondary market.
Twenty-nine broker firms, operated and
financed by the MSE, were privatized. New
statutes of the MSE were adopted by the
government resolution of 1995.
The Foreign Investment Law has been
amended three times since its initial adoption in
1993. The law was adopted to attract foreign
investors by exempting them from taxes in the
first 3-10 years and by giving a 50% discount in
taxes in the following 3-5 years depending on
their activities and exports. This has resulted in
an increase in the number of foreign
investments each year.
According to the government resolution, the
MSE was reorganized as a profit-making, state-
owned shareholding company.
Plans are to:
• develop a government and corporate bond
market;
• establish a mortgage-backed securities
market in Mongolia (a related law has just
been adopted);
• develop an information disclosure system
to:
• disseminate information through mass
media such as TV, radio and newspapers
in a fair and transparent way;
• redesign the market website to make it
more usable;
• improve public confidence and continue
training programs for market participants
and others;
• introduce the importance of the stock
market; and
• develop corporate governance principles.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES YEARBOOK 2003/2004
PAGE 71