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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. PAGE 108 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.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005 MONGOLIAN STOCK EXCHANGE OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks Jan-05 0.04 0.002 5.5 0.26 Feb-05 0.11 0.01 7.4 0.41 Mar-05 0.03 0.001 0.56 0.03 Apr-05 0.44 0.02 1.0 0.05 May-05 0.07 0.003 1.5 0.07 Jun-05 0.60 0.03 3.2 0.15 TOTAL 1.3 0.01 19.1 0.16 Bonds Jan-05 0.06 0.007 0.007 0.0008 Feb-05 0.04 0.006 0.005 0.0007 Mar-05 0.09 0.009 0.01 0.001 Apr-05 0.81 0.08 0.14 0.014 May-05 0.19 0.02 0.02 0.002 Jun-05 0.03 0.003 0.004 0.0004 TOTAL 1.2 0.02 0.18 0.003 Other Jan-05 n/a n/a n/a n/a Feb-05 n/a n/a n/a n/a Mar-05 n/a n/a n/a n/a Apr-05 n/a n/a n/a n/a May-05 n/a n/a n/a n/a Jun-05 n/a n/a n/a n/a TOTAL n/a n/a n/a n/a Market Capitalization US$ Millions Index Jan-05 23.7 631.1 Feb-05 27.3 594.0 Mar-05 34.8 706.0 Apr-05 32.6 738.2 May-05 34.6 771.7 Jun-05 36.7 802.3 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) 0.6 0.5 0.4 0.3 0.2 0.1 0.0 Stocks Index Contact Name Ms. J. Erdenbileg E-mail erdenbileg@mse.mn Website www.mse.mn MONTHLY MARKET CAPITALIZATION (US$ Millions) 900 40 800 35 700 30 600 500 400 25 20 300 15 200 10 100 5 0 0 Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun PAGE 109
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