JUNE 2013 - FEAS

FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013MONGOLIAN STOCK EXCHANGERio Tinto in its masive Oyu Tolgoi copper andgold project in South Gobi region.There are no immediate threats in North EastAsian region, which Mongolia is located, exceptan issue of North Korea.Mongolian peacekeepers also participateactively in international peacekeeping effortsin such countries as Chad and Sudan, as wellas participating in military operations of US-ledcoalition in Iraq and Afghanistan.As well as seeking close relationship with itstwo neighbors, Russia and China, Mongoliawill seek to have balance by developing closestrategic relationships with US, Japan and EU.Taking notice of its overreliance from China onexports of commodities, Mongolian Governmentwill seek to build a new railroad route to reachmarkets of Japan and South Korea via Russia.Economic PerformanceMongolian economy expected to have grownat a rate of 8% in 2010 and as of September2010 Industrial production grew at annual rate of15%. According to Bank of Mongolia, MongolianOfficial Foreign Currency Reserve hit US$ 2billion US$ at the end of 2010.In 2010 Mongolia made a foreign trade with132 countries of the world and total foreigntrade turnover reached 6177.1 million US$, fromwhich export stood at 2899.2 million US$ andimports at 3277.9 million US$. The total foreigntrade turnover increased by 53.5% and exportsincreased by 53.8% and imports increased by53.3% respectively.Total number of unemployed people whoregistered with relevant authorities as of end ofDecember 2010 stood at 38.3 thousand people.Consumer price index has increased by 13.0%compared to the same period last year inDecember 2010. The average yearly inflationrate was at 10.1%.In 2010 Government of Mongolian began tohand out 10,000 tugriks to each citizen everymonth and beginning from January 1, 2011it will hand out 21,000 tugriks to each citizen,which will boost domestic consumption.Mongolian National Tugrik (MNT) was the bestperforming currency of the world in 2010 andit appreciated by 16% and stood at 1,257.18against a US$. The authorities also agreedto allow greater exchange rate flexibility, tostrengthen the fragile banking system, andto improve the targeting of social spending.Investment in mining has increased a lot.The outlook of economy in 2011 looks verybright and Mongolian economy is expected togrow by 12% in 2011 according to a forecast byEconomic Intelligence Unit. Cash handouts tocitizens will increase domestic consumption, butwill also push inflation higher.As for copper, the price is projected to remainat high levels (more than 9,000 US$ per ton)during the forecast period, which will stimulateproduction. In 2010 coal became the largestexport commodity in terms of value and it isexpected to remain same in 2011.Prospects for development of new minesbrightened considerably in October 2009,when the government signed an agreementwith an international mining company to exploitthe Oyu Tolgoi copper and gold deposit.Investment in this project is expected to totalUS$ 6 billion production is projected to start in2013. The long-awaited Oyu Tolgoi agreementand subsequent construction will raise investorconfidence and have knock-on effects on otherparts of the economy.Moreover, the government is consideringproposals to mine the large Tavan Tolgoi coaldeposit with international partners and distributeshare vouchers after organizing it as Joint StockCompany. The valuation of Tavan Tolgoi depositby international experts range from 30-40 billionUS$ and it has 6.5 billion tonnes of coal reserve.FDI inflows into mining are expected to risesignificantly over the forecast period.Investment is expected to increase further,driven by Oyu Tolgoi. Also, MongolianGovernment is planning to build a railroad fromTavan tolgoi deposit to Russia via Gobi Desertand Eastern Mongolia with a plan to transportit to Russian Pacific ocean ports to Japan andSouth Korea.Moreover, after abolishment of 68% WindfallProfits Tax on gold and copper takes its effectbeginning from January 1, 2011, the gold soldto Central Bank and related tax revenue is likelyto increase, because gold industry will come outof shadow.Also, uranium mining and extraction is likelystart in 2011.Information obtained from the Exchange.Key Information ContactsNational Statistics Office www.nso.mnBank of Mongolia www.mongolbank.mnNational Development and Innovation Committee www.ndic.gov.mnCONTACT INFORMATIONContact Name Ms. D. Enkhzul E-mail enkhzul@mse.mn Website www.mse.mnPAGE 68