Invest Mongolia's Monday Memo - July 06th, 2015

6 July 2015

July 06th, 2015

Executive Summary


This week saw a number of exciting developments in the economic and political spheres:
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According to the Central Bank of Mongolia's monthly bulletin, the country's foreign reserves jumped 25.55% in May to US$1.59 billion, but is still down by 0.84% from 2014 year-on-year. Since 2013, Mongolia's currency has been declining over 30% against all other major currencies, which has pushed foreign reserves down. The report also explained that the Central Bank maintained its policy rate at 13% on low FDI and high budget deficit despite inflation figures being at the target rate. The Mongolian government has announced that it will be launching another $1bn of bonds to boost its foreign reserves and pay off some of its sovereign debt.
In the currency market, the US dollar continued to appreciate against the Mongolian tugrik increasing by 1.43% to trade at MNT 1,976.72.


Mongolia's Prime Minister Saikhanbileg has visited United Kingdom last week and met with UK's Prime Minister David Cameron. They both discussed increasing investments between the two countries and PM Saikhanbileg has urged UK companies to work closer with Mongolia's SME's. Saikhanbileg has also told the audience at the "Asia House" event that Mongolia has created a business-friendly environment and is ready to work on non-mining related sectors such as education and free trade pacts.


According to Bloomberg news, Mongolia is now ready to sell major stakes in 10 state-owned projects this year to boost FDI and revive growth. The Mongolian government is planning on offloading holdings in power plants and other businesses—such as the giant coking coal mine Tavan Tolgoi. PM Saikhanbileg is traveling to the US, UK and Europe looking for potential investors. In his speech in front of a packed audience at the "Asia House" event in London, he stated that the Mongolian government will reach an agreement on Tavan Tolgoi mines in the next two months. The government also announced that it is looking for ways to sell some stakes of the Mongolian Stock Exchange.


The Mongolian Stock Exchange's Top 20 Index has declined further last week by 4.04%. Amongst the biggest movers were construction firm Bayanbogd, which gained 15% and closed at MNT 11.50. Leather makers Mongol Savkhi and coal miners Sharyn Gol both declined 18.60% and 18.34% respectively.



According to the World Bank report, the poverty rate in Mongolia last year stood at 21.6%, down from 27.4% in 2012 and driven by the continued growth in livestock incomes, pensions and real wages. Their findings showed that although the poverty rate fell by 5.8% between 2012 and 2014, the pace was slow compared to the 2010 and 2012 period when it dropped more than 11%. The World Bank was pleased with Mongolia's progress, but urged the government to do more to increase the pace.