Bond-ing in Mongolia
As one Hong Kong banker told beyondbrics recently, “Mongolia is the only game in town”. And soon, gung-ho investors may get a new way to play it. The resource-rich country, forecast by one bank to be the world’s fastest-growing emerging market in coming years, wants to raise $500m in its first dollar bond sale.
This is not the first time it’s floated the idea. But it’s the first time it has the attention of so many bankers and investors.
Ganhuyag Chuluun Hutagt, Mongolia’s vice minister of finance, told Bloomberg: “We’re looking at an issuance of inaugural sovereign bonds in order to set up a benchmark and open up a window for private companies to go and raise money.”
Mongolia could also use the money for much-needed investment in infrastructure.
The sale would “probably” take place this year, pending approval from parliament, Hutagt said. But the idea still sounds tentative and should be treated as such. Last year Mongolia dropped a more ambitious plan for a $1.2bn bond sale.
The foundation of Mongolia’s appeal is its vast untapped resources of coal, copper and gold. They help explain why Mongolian equities were the world’s best performing last year, gaining 140 per cent in dollar terms.
A handful of western banks are also battling it out to get the mandate for the initial public offering of Erdenes Tavan Tolgoi, a state company that owns a huge coal deposit in the Gobi Desert.
The London Stock Exchange has even agreed a “strategic partnership” with the Mongolian Stock Exchange.
Mongolia’s surging commodity exports have also raised the value of its currency, the tugrik, on the foreign exchanges (1,247 to the dollar as we write) – another appetising trend for potential foreign bond investors.
Hutagt, the vice minister, said that Mongolia wanted to sell tugrik-denominated bonds too this year to “soak up extra liquidity” in the banking sector. That would help to combat currency appreciation.
Still, any Mongolian bond is likely to sit at the racier end of the fixed-income spectrum. The country is rated B1 by the ratings agency Moody’s, four levels below investment grade and on a par with Fiji and Papua New Guinea.
This is not the first time it’s floated the idea. But it’s the first time it has the attention of so many bankers and investors.
Ganhuyag Chuluun Hutagt, Mongolia’s vice minister of finance, told Bloomberg: “We’re looking at an issuance of inaugural sovereign bonds in order to set up a benchmark and open up a window for private companies to go and raise money.”
Mongolia could also use the money for much-needed investment in infrastructure.
The sale would “probably” take place this year, pending approval from parliament, Hutagt said. But the idea still sounds tentative and should be treated as such. Last year Mongolia dropped a more ambitious plan for a $1.2bn bond sale.
The foundation of Mongolia’s appeal is its vast untapped resources of coal, copper and gold. They help explain why Mongolian equities were the world’s best performing last year, gaining 140 per cent in dollar terms.
A handful of western banks are also battling it out to get the mandate for the initial public offering of Erdenes Tavan Tolgoi, a state company that owns a huge coal deposit in the Gobi Desert.
The London Stock Exchange has even agreed a “strategic partnership” with the Mongolian Stock Exchange.
Mongolia’s surging commodity exports have also raised the value of its currency, the tugrik, on the foreign exchanges (1,247 to the dollar as we write) – another appetising trend for potential foreign bond investors.
Hutagt, the vice minister, said that Mongolia wanted to sell tugrik-denominated bonds too this year to “soak up extra liquidity” in the banking sector. That would help to combat currency appreciation.
Still, any Mongolian bond is likely to sit at the racier end of the fixed-income spectrum. The country is rated B1 by the ratings agency Moody’s, four levels below investment grade and on a par with Fiji and Papua New Guinea.
Comments
Post a Comment