JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013MONGOLIAN STOCK EXCHANGEWe are focusing on creating a favorablelegal environment and better regulation inthe capital markets.Altai KhangaiActing Chief Executive OfficeWe would like to express our warm greetingsand best wishes to all of you on the occasionof the 20th anniversary of Mongolian StockExchange.During the last 20 years MSE has encounteredseveral challenging years, as well as, evenmore years of accomplishments. In total, 474Joint stock companies have been listed onMSE with the stock trading value reaching262.5 bln MNT, while values of Governmentand Corporate bond trading reached 215.1 blnMNT respectively. The number of Broker-Dealercompanies with special licenses to operate inthe Securities market reached 45, and they arecurrently servicing about 450,000 individualinvestors and clients. Total dividend distributionhas reached 109.6 bln MNT.Mongolian Government is increasinglyrecognizing the importance of the capitalmarkets in development of the nationaleconomy and focusing on its expansion. Wewould like to emphasize on the initiative todistribute shares of “Erdenes Tavan Tolgoi”JSC, the holder of massive coking coal deposit,to all citizens of Mongolia and to local privateentities, and believe that conducting openmarkettrading of its shares will accelerate thegrowth of the capital markets in Mongolia andwill be a crucial point of its development.In the recent years, the Parliament andGovernment of Mongolia has issued number ofimportant policy documents on developmentand improvement of current legal environmentin the capital market. In order to modernize incompliance with international standards andto enhance the development of the capitalmarkets, the Securities Law is being re-draftedand will soon be submitted to the Parliament.In 2009, the Financial Regulatory Committee ofMongolia has issued “Prime Objectives of theStock Market Development Program in 2009-2012”.We are focusing on engaging internationallyrecognized consultants and institutionsin processing the draft of applicable rulesand regulations as well as drafting of laws.Consequently, this will create a favorable legalenvironment and better regulation in the capitalmarkets.In December of 2010, the State PropertyCommittee of Mongolia has signed a longtermStrategic Partnership Agreement withLondon Stock Exchange Group (LSEG) torestructure and develop the Mongolian StockExchange. Based on the agreement, LSEGwill cooperate with MSE at the administrativeand managerial levels and address the issuesthat require immediate attention. There is anabsolute necessity to create a favorable legalframework for capital markets, improve themarket infrastructure and introduce a worldclasstrading platform to upgrade MSE andthe clearing, settlement depositary systemin line with international standards. It hasalso become essential to increase domesticcapital investment and the competiveness ofthe capital market, to enhance liquidity in themarket, to protect the interests of investors,to mitigate the non-market risks, as well as, toimprove the human resource productivity.We would like to thank and wish happiness,health and prosperity to all individualand institutional investors, professionalorganizations and issuers for your input in thedevelopment of capital markets in Mongolia.HISTORY AND DEVELOPMENTMongolian Stock Exchange was established onJanuary 18th of 1991, as the official and onlystock exchange of Mongolia, and throughoutthis relatively brief history, the exchange wasable to achieve remarkable growth in tandemwith the robust economic performance ofMongolia.MSE serves the domestic cash equity marketwith 366 listed companies and a marketcapitalization of 1.373 trillion tugriks (US$ 1.07billion) as on December 31, 2010.On September 17, 2010, Mongolian StockExchange has conducted Government Bondtrading worth 30.0 billion tugriks consisting of3,000 pieces of ordinary Government Bond.In December 2010, Mongolian StockExchange has concluded Strategic PartnershipAgreement with London Stock Exchange. MSEhas concluded MoU on Cooperation with 8Stock Exchanges in the world, such as TokyoStock Exchange, Korea Exchange etc. Also,Mongolian Stock Exchange is a member oftwo stock exchange associations, namely, itis a member of Federation of Euroasian StockExchanges and Asia and Oceania StockExchange Federation.FUTURE OUTLOOKIn 2011 MSE will:• Increase institutional participation• Attract more foreign investors• Enhance the quality of market intermediation• Strengthen the equity and debt markets• Conduct privatization of state assets• Invest in the social infrastructure• Develop human resourcesand;• Promote the implementation of internationalbest practices• Seek to introduce new financial product onthe Stock ExchangeCAPITAL MARKET DEVELOPMENTAND ECONOMIC OUTLOOKPolitical OutlookThe outlook for the domestic political scene isstable, and the president, Elbegdorj Tsakhiaand, prime minister, Batbold Sukhbaatar willmaintain the Mongolia’s relatively liberal socialand economic policies, as well as its multilateralforeign policy stance. Mongolia’s foreignpolicy will continue to be based on its closerelationship with its two neighbors, Russia andChina, as well and developing close relationshipwith its “Third Neighboors”, the US, Japan andWestern Countries.These ties have been strengthened by a seriesof bilateral visits with the Russia, China andJapan and other countries. Mongolia has alsosigned agreement on setting up state ownedJV of Mongolia and Russia, Dornod Uran” toextract and mine uranium resources. Mongoliaalso has significant presence of Western capitalin the form of investment by Ivanhoe Mines andPAGE 67