Mongolia the newest “in thing” in investing
Some people have been talking up the imminent arrival of Mongolia as a hot new investing destination for years now, usually to hoots of derision. Recently, though, they had not one but three separate confirmations that Mongolia has finally become the newest “in thing” in the fickle world of investing, reports The Financial Times. The first indicator was at an event for a London think-tank called the CSFI. This august institution usually doesn’t talk much about adventurous investing and certainly not about Mongolia but at a gathering of Big Bears – pessimistic types predicting a coming financial storm – the subject of Mongolia came up.
While most of the speakers were rather predictably banging on about gold, one talked about the growing supply issues facing the global resources sector and the fact that Mongolia seems to have most of the easy-access mega projects worth investing in. Crucially, its canny political leadership has no intention of being gobbled up by either the Chinese or the Russians in a resources land grab and is busily playing off each of these superpowers.
A couple of days later, another development caught their attention – namely that one of the most successful international stockpickers, James Barstow at Aurora investment trust, has made a big bet on a Mongolian oil play called PetroMatad, which is itself attracting huge attention among the speculative small-cap brigade on the London market. It’s best to see the Mongolia story as part of a wider regional narrative that includes the Chinese resource-rich provinces of Xinjiang and Inner Mongolia, as well as the state of Mongolia proper.
The clincher, though, came with the news that a specialist investment research firm called Eurasia Capital has launched . . . wait for it . . . a Mongolian equity tracking index. The index is still a vulnerable, young waif, comprising an odd mixture of hugely speculative miners and a few financial services groups. But its launch speaks of a new mania gripping the Asian markets. Barely a week goes by without some Hong Kong-based outfit announcing it’s about to launch a big new Mongolian division. There is talk of aircraft arriving in Ulaanbaatar, crammed full of bankers, mining execs and stock promoters all desperate to come up with the next Big Mongolian Thing.
The fun and games have only just begun when it comes to this landlocked, resource- rich country. Some specific Mongolian funds are certain to emerge that offer investors a more attractive play on this frontier market – at the moment all but a handful of the companies on the Eurasia index are very specific resource exploration companies. The biggest opportunities will be in the broader service economy sector as well as in real estate and infrastructure. But one can predict the multiplier effects of billion-dollar projects will cascade into the small, illiquid local stock market, triggering a massive bubble.
Origo’s chief executive Chris Rynning says: “It is inevitable that Mongolia will experience bubbles with international investors charging in, creating immediate domestic wealth and rapid asset appreciation.” He adds the important caveat that “a lot of Mongolian companies look very pricey already. I think many of them will struggle to meet their production targets, mainly because of slower-than-expected infrastructure build-out”.
While most of the speakers were rather predictably banging on about gold, one talked about the growing supply issues facing the global resources sector and the fact that Mongolia seems to have most of the easy-access mega projects worth investing in. Crucially, its canny political leadership has no intention of being gobbled up by either the Chinese or the Russians in a resources land grab and is busily playing off each of these superpowers.
A couple of days later, another development caught their attention – namely that one of the most successful international stockpickers, James Barstow at Aurora investment trust, has made a big bet on a Mongolian oil play called PetroMatad, which is itself attracting huge attention among the speculative small-cap brigade on the London market. It’s best to see the Mongolia story as part of a wider regional narrative that includes the Chinese resource-rich provinces of Xinjiang and Inner Mongolia, as well as the state of Mongolia proper.
The clincher, though, came with the news that a specialist investment research firm called Eurasia Capital has launched . . . wait for it . . . a Mongolian equity tracking index. The index is still a vulnerable, young waif, comprising an odd mixture of hugely speculative miners and a few financial services groups. But its launch speaks of a new mania gripping the Asian markets. Barely a week goes by without some Hong Kong-based outfit announcing it’s about to launch a big new Mongolian division. There is talk of aircraft arriving in Ulaanbaatar, crammed full of bankers, mining execs and stock promoters all desperate to come up with the next Big Mongolian Thing.
The fun and games have only just begun when it comes to this landlocked, resource- rich country. Some specific Mongolian funds are certain to emerge that offer investors a more attractive play on this frontier market – at the moment all but a handful of the companies on the Eurasia index are very specific resource exploration companies. The biggest opportunities will be in the broader service economy sector as well as in real estate and infrastructure. But one can predict the multiplier effects of billion-dollar projects will cascade into the small, illiquid local stock market, triggering a massive bubble.
Origo’s chief executive Chris Rynning says: “It is inevitable that Mongolia will experience bubbles with international investors charging in, creating immediate domestic wealth and rapid asset appreciation.” He adds the important caveat that “a lot of Mongolian companies look very pricey already. I think many of them will struggle to meet their production targets, mainly because of slower-than-expected infrastructure build-out”.
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