21.04.2016 mongolian capital market development gateway
TRANSCRIPT
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Mongolian Capital Market
Development Gateway Ulziibayar Bold
Chair, Board of Directors, MASD
CEO, Ard Capital Group LLC
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This material is intended solely for information purposes and is not to be
construed, under any circumstances, by implication or otherwise, as an
offer to sell or a solicitation to buy or sell or trade in any commodities or
securities herein named. Information is obtained from sources believed
to be reliable, but is in no way guaranteed. No guarantee of any kind is
implied or possible where projections of future conditions are attempted.
In no event should the content of this material be construed as an express
or implied promise, guarantee or implication that you will profit or that
losses can or will be limited in any manner whatsoever. All investments
are subject to risk, which should be considered prior to making any
investment decisions.
Disclaimer
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Phase I: Until 2009
• Early 1990s democratic reform transition to market economy,
• MSE established in January 1991 to privatize State-Owned
Enterprises (“SOE”s) boosting private ownership & private
sector,
• Citizens granted 1 privatization voucher to choose shares to
be listed on MSE,
• 475 SOEs privatized & MSE listed in 1992-1995,
• First Securities Market Law in 1994.
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• By 2002, concentration of dispersed shares in few
hands lead to drop in trading volume,
• Market needing new products,
• Revised Securities Market Law in 2002 bringing new
products,
• 18 IPOs, 4 follow-up public offerings, 5 corporate
bond introduced to MSE from 2005.
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However...
• Lack of regulations such as minority shareholders
protection,
• Over-regulation on new products,
• Lack of transparency & corporate governance of
listed companies,
• Lack of new listing & financial products,
=> Lead to low market liquidity, low participation.
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• From 2010 international investors attracted to Mongolia
because of mining boom,
• Drastic increase in MSE trading volume & market
capitalizations,
• Strategic partnership agreement with LSE signed by State
Property Committee to develop MSE & local capital
market,
• July 2012: New trading platform (MIT system) introduced
to MSE.
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Phase II: 2010 to 2013
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• Tripartite agreements between Brokers, Clearing Banks
(Escrow Accounts to hold cash ) and MSCH&CD (to hold
shares),
• Upgrade of MSE website
▫ Financials of JSCs,
▫ Details of dividends payment (ex-dates),
▫ Market screen + Bid-Ask with sizes,
▫ Details of Government bonds outstanding,
▫ …
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• New Securities Market Law approved by Parliament effective
January 1, 2014:
General framework
Dual listing
DR
Capital raising procedure simplified
New regulation regarding the transparency, disclosure & corporate
governance
• Approval of Investment Fund Law
Exemption from corporate tax
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50 30 56 131
718 516 621
1,374
2,169
1,800 1,671
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Market Capitalization (MNT bn)
585.69
32,955
14,911.2
0
10000
20000
30000
40000
2005-1 2006-1 2007-1 2008-1 2009-1 2010-1 2011-1 2012-1 2013-1
MSE Top-20 Index
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41.4 13.0 89.4
8.0
3.1
1.7
0
25
50
75
100
2010 2011 2012
Weight of foreign individuals & companies
Гадаадын иргэд
Гадаадын ААН
=91.1
=49.4
=16.1
Foreign individuals
Foreign companies
Activity, Local vs. Foreign(2010-2012)
Source: MSE, MSCH&CD NB: Foreign activity in 2012 might include some internal reorganization by foreign funds
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Phase III: 2014-2015
Drastic FDI drop due to political & economic conditions, impacting negatively capital markets
1,629.7
4,620.1 4,407.8
2,098.1
276.0 182.7
0
3000
6000
2010 2011 2012 2013 2014 2015
FDI (USD mln)
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Political appointment for professional organizations authorities affects operations & priorities.
1,374
2,169
1,800 1,671
1,442 1,262
0
600
1200
1800
2400
2010 2011 2012 2013 2014 2015
Market Capitalization (MNT bn)
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16,474.09
12,763.89
8000
12000
16000
20000
MSE Top-20 Index
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• MASD recognized as the Self Regulated Organization
• New MSE management team, more responsive
• New initiatives:
IPO: Mongol Post, Mongolia Mortgage Corporation=
Total MNT 43.5 bn
Bonds: Erchim bond, MNT 0.5 bn
Government bonds: MNT 562.4 bn in 2015
Phase IV: New Era?
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Recent IPOs (15% Free Float)
Mongol Post,
MNP
Mongolian
Mortgage
Corporation,
MIK
MNT 6.7 bn MNT 37.3 bn
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235: Listed companies
• 235 have filed their financials with MSE
• (only 91 in 2012!),
• 21 have already announced 2015 dividends ,
• 58 “Compliant” brokers.
Current MSE
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I. Recognition of Capital Market importance: Priority
II. JSCs have bullish expectations on Capital Market Development. Low rate of delisting. JSC are very committed.
Capital Market Opportunities
329
261 237 235 236
0
100
200
300
400
2012 2013 2014 2015 2016
Number of JSC
16
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9,137 10,540
14,985
0
5000
10000
15000
20000
2013 2014 Aug-15
Annual Accounts Opening at MSE
74.2 79.1
11.4
52.2
7.4
0
30
60
90
2011 2012 2013 2014 2015
Total Dividends Paid (MNT bn)
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III. More IPOs Coming
Short-term:
• Additional share issuance of “Suu” JSC,
• Expected IPO issuance of “Monos Group”,
• 5 pilot projects with JICA.
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• Thermal power plant IV, • Thermal power plant III, • Thermal power plant II, • Thermal power plant Darkhan, • Thermal power plant Erdenet,
• Shivee Ovoo JSC* , • Baganuur JSC *, • Telecom Mongolia JSC *, • Mongolian Agricultural Commodity Exchange, • MSE.
(*) Already MSE listed
IV. Privatization 2015-2016
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V. SOEs To Be Privatized on MSE in Long-term
82 State Owned Enterprises
Total Asset:
MNT 11.7 tn ~ USD 5.8 bn
Source: State Property Committee
(2014)
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• Dual listing & DR issue of more than 40 mining
companies listed abroad (LSE AIM, HKEX, ASX, TRX) such as TRQ, MMC,…
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Issues
• Tax favorable environment,
Exemption from capital gain & dividend income
tax,
Tax incentives for IPO issuers,
• Establish local institutional investors base,
• Upgrade professional participants skills,
• Raise awareness & knowledge of Mongolian public
to be associated with Mongolia’s success.
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Technical Issues
• Technical issues, among others:
• Account opening complications,
• Fund transfers between MSCH&CD and Clearing Banks,
• Fixing flaws in equity indices definitions & “close”,
infrastructure related issues,
• Faster FRC approval process for corporate actions,
• Mandatory payment of dividends to MSCH&CD accounts,
• ….
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Privatizations through capital market
=> Sustainable stable sources of capital through capital market for Government & private sector,
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Objectives
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Main Sources Of Information
• MSE Website
JSC quarterly financials,
Information on corporate actions, privatization,…
• MSCH&CD Website Entitlement Report,
Dividend announcements,
• FRC Website
Review of JSCs’ shareholders with same interest,
Complete review of listed companies,
Review of shareholders who newly bought 5 or more percent of JSC,
Detailed information of shareholders who own 5 or more percent of JSC,
Review of companies who took loan by hypothecating company’s property etc.
• Brokers research reports
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Thank You For Your
Attention