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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
MONGOLIAN STOCK EXCHANGE
Rentson Sodkhun
Chairman and CEO
In 2004 Mongolian Stock Exchange’s (MSE)
main objectives were to improve the
efficiency of the stock trading, especially to
increase the volume of bond trading, attract
investors and build confidence among
investors, improve the quality of stock market
research and its advocacy, increase public
confidence and the surveillance of securities.
As a result, some progress was achieved in
2004; including the expansion of the
company bond market, some of which trade
in foreign currency and the establishment of
a new underwriting entity, which is to provide
professional services to the stock market.
HISTORY AND DEVELOPMENT
During the transitional period from a central
planned economy to a market economy in
Mongolia, many social and economic
changes were made, such as the
establishment of new relations, new entities,
new productions and services. Two of those
changes were the founding of the MSE on
18 January 1991 by government resolution
and the initiation of the privatization process.
According to the privatization policy adopted
by the government in 1992-1995, 96.1
million shares valued at tugrugs 8.2 billion
(US$ 7.0 million) of 475 state-owned entities
were traded by the MSE.
The Securities and Exchange Law was
passed in 1994 and the Corporate Law in
1995 resulting in the establishment of the
secondary market. Twenty-nine broker firms,
operated and financed by the MSE, were
privatized. New statutes of the MSE were
adopted by the government resolution of
1995.
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In 2005 our efforts will focus on creating a
favorable legal environment for the
Mongolian Stock Exchange.
Nevertheless, it is necessary to note that due
to macroeconomic situations there has been
no significant improvement on investment
through the stock market, this lack in
improvement has been especially influenced
by the current Mongolian market economy.
The stagnant situation of the Mongolian
stock market where as sustainable
development persists in the banking sector
shows a lack of appropriate state policy in its
coordination. Furthermore, flexible and
accurate policy to support relationship
between the monetary and the fiscal policies
and development of its legal environment are
in demand.
With the start of secondary market activity,
shares of more than tugrugs 38 billion
(US$ 32.5 million) were traded during 1996-
2003. Since the inception of government
bond trading in 2000, and corporate bond
trading in 2001, to date government bonds
valued at tugrugs 105.4 billion (US$ 90.2
million), and corporate bonds valued at
tugrugs 6.9 billion (US$ 6.0 million) have
been traded.
The new Securities and Exchange Law,
adopted by Parliament in December 2002,
declared the MSE to be a business entity,
allowing it to carry out legal business
services.
According to the government resolution, the
MSE was reorganized as a profit-making,
state-owned shareholding company.
In 2005 our efforts will focus on creating a
favorable legal environment for the MSE.
We are planning to submit amendments to
related laws with an aim to improve the
investment environment and the stock
exchange activities. A close link between the
MSE, security issuers and investors as an
important part of our policy will be pursued
along with actions to expand the company
bond market. Increasing transparency and
efficiency of service provided by the MSE are
also priority areas. Finally, we are planning to
introduce a new type of bond at the MSE,
such as a mortgage bond.
FUTURE OUTLOOK
In 2005 the MSE plans to:
• develop a government and corporate
bond market, increase the bond market size
and issue bonds in foreign currency;
• prepare for privatization in the stock
exchange;
• develop an information disclosure system
so as to disseminate information through
mass media TV, radio and newspapers in a
fair and proper way.
• improve public confidence and continue
training programs for market participants
and peoples; and
• activate the Government support on
security tax policies and laws for security
issuer and investors.