Invest Mongolia's Monday Memo - June 29th, 2015

29 June 2015

June 29th, 2015

Executive Summary


This week saw a number of exciting developments in the economic and political spheres:
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The Mongolian government made its dim sum bond debut last week, raising over $160m (RMB1 billion) from international investors. It hopes to raise more in the coming weeks, possibly another $1bn from the international market. This latest raising of cash comes on the back of positive news generated by Oyu Tolgoi; the government recently coming to a resolution with Rio Tinto over the development of the second phase of the mine. The giant mining deal is worth over $6bn and Rio has already committed to spending $250m on the mine this year. Rating agencies such as Moody's have warned the Mongolian government that unless production ramps up at OT, Mongolia is dependent on external borrowings and could see further falls in its foreign exchange reserves. However, the most recent TDB bond has traded extremely well since its debut in mid-May and the Mongolian government still believes there is strong demand for its sovereign bonds.
In the currency market, the US dollar continued to appreciate against the Mongolian tugrik increasing by 1.65% to trade at MNT 1,948.93.


Mongolia's PM Saikhanbileg met with Russian President Putin to discuss various ways to encourage both countries' businesses to work together. Russian and Mongolian joint venture parteners attended the meetings and both sides agreed to eliminate political interest and give more power to the board of directors of companies to make decisions. PM Saikhanbileg also expressed views on increasing exports of meat and cattle vaccinations to Russia.


According to Reuters, Mongolia's PM Saikhanbileg told the media that Rio Tinto has already committed to invest at least $250m in the construction of the massive underground mine at Oyu Tolgoi. The second phase of the construction is expected to begin at the end of this year, depending on feasibility studies. PM Saikhanbileg is visiting the U.S and meeting with politicians and business leaders to encourage investment into Mongolia. In addition, he hopes to set up a sovereign wealth fund but has not given any details yet. After the US trip, Mr Saikhanbileg will jet off to the UK to meet business leaders and will host an event at the London Stock Exchange on 1st July.


The Mongolian Stock Exchange's Top 20 Index declined last week after gaining for 11 days in a row. The main index closed at 15,221.72. Amongst the top movers, coal miners Sharyn Gol gained by 17.66% and agricultural producers Uvs Chatsargana lost 15.47% to trade at MNT 1000.



According to a recent poll, 85% of residents in UB told the city mayor to drop the controversial license plate restrictions. An increasing number of complaints made the city authorities run a poll to canvas general public opinion on restricting their cars. For the last two years, UB city residents have not been able to use their cars available for one day of the week.