FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT JUNE 2012
MONGOLIAN STOCK EXCHANGE
CAPITAL MARKET DEVELOPMENT AND ECONOMIC OUTLOOK
Political Outlook
The outlook for the domestic political scene is
stable, and the president, Elbegdorj Tsakhia
and, prime minister, Batbold Sukhbaatar will
maintain the Mongolia’s relatively liberal social
and economic policies, as well as its multi-
lateral foreign policy stance. Mongolia’s foreign
policy will continue to be based on its close
relationship with its two neighbors, Russia and
China, as well and developing close relationship
with its “Third Neighboors”, the US, Japan and
Western Countries.
These ties have been strengthened by a series
of bilateral visits with the Russia, China and
Japan and other countries. Mongolia has also
signed agreement on setting up state owned
JV of Mongolia and Russia, Dornod Uran” to
extract and mine uranium resources. Mongolia
also has significant presence of Western capital
in the form of investment by Ivanhoe Mines and
Rio Tinto in its masive Oyu Tolgoi copper and
gold project in South Gobi region.
There are no immediate threats in North East
Asian region, which Mongolia is located, except
an issue of North Korea.
Mongolian peacekeepers also participate
actively in international peacekeeping efforts
in such countries as Chad and Sudan, as well
as participating in military operations of US-led
coalition in Iraq and Afghanistan.
As well as seeking close relationship with its
two neighbors, Russia and China, Mongolia
will seek to have balance by developing close
strategic relationships with US, Japan and EU.
Taking notice of its overreliance from China on
exports of commodities, Mongolian Government
will seek to build a new railroad route to reach
markets of Japan and South Korea via Russia.
Economic Performance
Mongolian economy expected to have grown
at a rate of 8% in 2010 and as of September
2010 Industrial production grew at annual rate of
15%. According to Bank of Mongolia, Mongolian
Official Foreign Currency Reserve hit US$ 2
billion US$ at the end of 2010.
In 2010 Mongolia made a foreign trade with
132 countries of the world and total foreign
trade turnover reached 6177.1 million US$, from
which export stood at 2899.2 million US$ and
imports at 3277.9 million US$. The total foreign
trade turnover increased by 53.5% and exports
increased by 53.8% and imports increased by
53.3% respectively.
Total number of unemployed people who
registered with relevant authorities as of end of
December 2010 stood at 38.3 thousand people.
Consumer price index has increased by 13.0%
compared to the same period last year in
December 2010. The average yearly inflation
rate was at 10.1%.
In 2010 Government of Mongolian began to
hand out 10,000 tugriks to each citizen every
month and beginning from January 1, 2011
it will hand out 21,000 tugriks to each citizen,
which will boost domestic consumption.
Mongolian National Tugrik (MNT) was the best
performing currency of the world in 2010 and
it appreciated by 16% and stood at 1,257.18
against a US$. The authorities also agreed
to allow greater exchange rate flexibility, to
strengthen the fragile banking system, and
to improve the targeting of social spending.
Investment in mining has increased a lot.
The outlook of economy in 2011 looks very
bright and Mongolian economy is expected to
grow by 12% in 2011 according to a forecast by
Economic Intelligence Unit. Cash handouts to
citizens will increase domestic consumption, but
will also push inflation higher.
As for copper, the price is projected to remain
at high levels (more than 9,000 US$ per ton)
during the forecast period, which will stimulate
production. In 2010 coal became the largest
export commodity in terms of value and it is
expected to remain same in 2011.
Prospects for development of new mines
brightened considerably in October 2009,
when the government signed an agreement
with an international mining company to exploit
the Oyu Tolgoi copper and gold deposit.
Investment in this project is expected to total
US$ 6 billion production is projected to start in
2013. The long-awaited Oyu Tolgoi agreement
and subsequent construction will raise investor
confidence and have knock-on effects on other
parts of the economy.
Moreover, the government is considering
proposals to mine the large Tavan Tolgoi coal
deposit with international partners and distribute
share vouchers after organizing it as Joint Stock
Company. The valuation of Tavan Tolgoi deposit
by international experts range from 30-40 billion
US$ and it has 6.5 billion tonnes of coal reserve.
FDI inflows into mining are expected to rise
significantly over the forecast period.
Investment is expected to increase further,
driven by Oyu Tolgoi. Also, Mongolian
Government is planning to build a railroad from
Tavan tolgoi deposit to Russia via Gobi Desert
and Eastern Mongolia with a plan to transport
it to Russian Pacific ocean ports to Japan and
South Korea.
Moreover, after abolishment of 68% Windfall
Profits Tax on gold and copper takes its effect
beginning from January 1, 2011, the gold sold
to Central Bank and related tax revenue is likely
to increase, because gold industry will come out
of shadow.
Also, uranium mining and extraction is likely
start in 2011.
Information obtained from the Exchange.
Key Information Contacts
National Statistics Office www.nso.mn
Bank of Mongolia www.mongolbank.mn
National Development and Innovation Committee www.ndic.gov.mn
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