Capital Markets
From The Report: Mongolia 2014
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For the Mongolian Stock Exchange (MSE), 2013 was a year of transition. While performance remained weak and trading was exceedingly thin, preparations were being made for a comeback. The hope is that the foundation has been set to make 2014 a year of recovery for the market. Under previous legislation custodian banking was not available; however, under a new law, international investors will not have to worry about the risks associated with investing in a market with no intermediary banking institutions. Despite having 79 registered brokers, only one firm oversees almost all trading on the MSE. In addition, risk management has not been well-developed and understanding of stocks is low among the general public. What is now needed most is for new issues to come to the market, and this will depend on the ability of the regulators to put new laws into practice.
This chapter contains an interview with Masa Igata, Founder & CEO, Frontier Securities.

Articles from this Chapter

Overview

Taking stock: New regulations and guidelines are aimed at renewing the market
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For the Mongolian Stock Exchange (MSE), 2013 was a year of transition. While performance remained weak and trading was exceedingly thin, preparations were being made for a comeback. New systems were introduced, important rules were changed and a new securities law was enacted that should address many of the gaps that previously existed and made the market less attractive to international investors – in some cases even impossible to invest in. The hope is that the foundation has been set to make…

Analysis

ETT on deck: After some delay, the state-owned company is set to be opened up to the market
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The initial public offering (IPO) of Erdenes Tavan Tolgoi (ETT) has been long delayed. If the giant multi-market stock sale can be completed, confidence could very well be restored and the capital markets of Mongolia could be revived. ETT has proven more difficult than first imagined, but much of what has held it back has been addressed and the transaction may go ahead according to the current schedule. On The Block ETT was formed in 2010 to own and manage the East Tsankhi section of the Tavan…

Analysis

Samurai to the rescue: A promising new bond will require better planning
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Like the country’s equity market, Mongolia’s bond market had a tough year in 2013. Trading in debt securities dried up on the Mongolia Stock Exchange (MSE), with turnover in corporate bonds going to zero, while pricing on the country’s eurobonds collapsed. As Mongolia’s balance of payments situation worsened, bond investors soured on Mongolian paper. However, as 2013 progressed, talk of a yen-denominated, partly Japan-backed bond began to surface, and the previous issues stated to recover.…

Interview

OBG talks to Masa Igata, Founder & CEO, Frontier Securities
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Interview: Masa Igata What impact can we expect from new regulations, such as the Mongolian Revised Securities Market Law or the Investment Funds Law? MASA IGATA: All the regulatory changes that Mongolia’s financial sector is going through are good and beneficial in the long run, although we might not see immediate changes in the current status quo. The Revised Securities Market Law and Investment Fund Law took effect on January 1, 2014. However, as of yet, we do not seem to have an entity or…

Analysis

BDS ec: Investment banking
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The Company BDS ec was established in 1991 and is both the oldest and largest brokerage and investment bank in Mongolia. BDS ec is the only publicly traded financial company on the Mongolian Stock Exchange (MSE) and trades under the symbol of MO:BDS. BDS ec’s market share of traded volume on the MSE over the past three years is 69%, and the company has underwritten 75% of primary equity offerings over the past five years. BDS ec’s market capitalisation is $17m, and it trades at 25 times its 2012 earnings and 3.7 times its book value. Trading volumes on the MSE have declined significantly since the implementation of the London Stock Exchange…

Analysis

Prophecy Coal: Mining
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The Company Prophecy Coal is an international company focused on developing its Ulaan Ovoo coal project and Chandgana 600-MW mine mouth power plant project in Mongolia. The company’s stock trades on the Toronto Stock Exchange, OTC Markets QX and the Frankfurt Stock Exchange with current market capitalisation of around $20m. The Ulaan Ovoo mine is located in Selenge province of northern Mongolia. The mine is 17 km from the Mongolian-Russian border and less than 140 km west of the Trans-Mongolian Railway. Total resources are over 200m tonnes of high-quality thermal coal with an average calorific value of 5000 kcal per kg, low ash (10%) and low…

Analysis

Turquoise Hill: Mining
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The Company Turquoise Hill (TRQ: TSX, NYSE & NASDAQ) remains the most important stock for investors watching Mongolia. TRQ is an international mining company focused on copper, gold and coal mines in the Asia Pacific region with principal assets located in Mongolia. Its assets include a 66% interest in Oyu Tolgoi (OT), one of the world’s largest copper, gold and silver mines that started production in early 2013, and is now producing and shipping concentrate to customers in China; and a 56% interest in Mongolian coal miner SouthGobi Resources (SGQ: TSX,1878:HK), which is in the process of expanding production and exports to China. OT is…