Mongolia Exchange Value May Reach $40 Billion on Rule Change

The passage of a Mongolian securities law allowing dual listings would boost the value of the nation’s stock exchange by 33-fold to $40 billion within five years, said the bourse’s chief executive officer.

The legislation may be passed during the spring session of Parliament, which runs from April till July, Khangai Altai said in an interview in Ulan Bator yesterday. The bourse, which has a capitalization of $1.2 billion, has been waiting for regulatory changes for more than a year, he said.

“We have just laid down the fundamentals and imposed the rules. Now what we need are the legal changes,” he said. “The new securities law will connect the Mongolian market with international markets. Many internationally listed companies that do business have an interest in listing.”

Mongolia is seeking to attract more investors to the nation’s stock market where the benchmark MSE Top 20 Index has tumbled 11 percent this year, Asia’s worst performer. The country’s central bank cut interest rates in January for the first time since 2009 after economic growth declined to 12.3 percent last year from a record 17.3 percent in 2011.

Slower growth in China, which buys more than 90 percent of Mongolian exports, has reduced demand for its coal and copper. Mongolia, squeezed between China and Russia, was the world’s fastest-growing economy in 2011, according to the World Bank.

Dual List

At current prices, a $40 billion market value would rank Mongolia as the 16th-largest stock market in the Asia Pacific region, according to data compiled by Bloomberg. Vietnam is presently the 15th-largest with a value of $43.2 billion, the data show.

The legislation that will allow overseas firms to dual list on the stock exchange could lure foreign companies that have assets in Mongolia. Canadian miner Turquoise Hill Resources Ltd. (TRQ)has a 66 percent stake in Mongolia’s Oyu Tolgoi copper and gold mine project.

“There are 40 internationally listed companies with operations in Mongolia, which do have the appetite to list their shares to set up a connection with the local community,” Altai said.

Once dual listings are allowed, liquidity will flood the market, providing an environment for most local companies to list their shares, he said.

“The current law does not enable us to connect to international markets. Dual listings will bring liquidity to the market and help Mongolian companies grow,” he said.

To contact the reporter on this story: Michael Kohn in Ulan Bator at mkohn5@bloomberg.net
To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net; Darren Boey at dboey@bloomberg.net