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John Polomny
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John Polomny writes the Actionable Intelligence Alert. The Actionable Intelligence Alert provides unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Mongolia: Are we at the investment tipping point? 2 comments
    Mar 6, 2011 7:51 PM
    I have written quite a bit in the past about how excited I am about the investment prospects in Mongolia. In fact after setting up a Mongolian brokerage account over a year ago was fortunate achieve some awesome results as I bought in at literally the exact bottom of the market. The market was so undervalued that if a person just bought a selection of the largest market cap stocks you would have done well. The market is still relatively undervalued but I think it will be a bit more difficult to just buy random stocks and make money. For short a primer on Mongolia check out my article on the Seeking Alpha website.
    I think Mongolia is now reaching the tipping point when quite bit of attention and money will be coming into the country. The country recently signed an agreement with the London Stock Exchange to assist the Mongolian Stock Exchange in modernizing and becoming more able to support foreign investment. As of January 1, 2011 the government rescinded the windfall profit tax on gold and copper. This should attract more capital to the mining industry as Mongolia aligns its mining laws with the rest of the world. The government is staffed with quite a few western educated people who understand that the vast mineral wealth of the country will have to be developed with the assistance of western know how and capital. In addition, because Mongolia is sandwiched between China and Russia, there is a desire to form economic relationships with countries other than these two giants.
    The continued successful development of the Oyu Tolgoi gold/copper mine has led the government to accelerate the IPO and development of the enormous Tavan Tolgoi coal project. The expectation is that the share offering will take place sometime this summer. In addition the government has reduced the amount of regulations, by over 100 rules being stricken from the books, required to start a business. There are some concerns; including a big gap between the wealthy and poor, infrastructure deficiencies that will require huge investment to repair or in most cases to build from scratch, a weak but still developing banking sector, and finally how the country will be able to handle the huge increases in wealth that will occur over the next few decades. This is particularly concerning as the current inflation rate is running at about 20%.
    Looking at some other countries that have experienced similar huge resource windfalls we can get a sense of what may occur in Mongolia. To review Mongolia has almost three million citizens and will have a GDP of around $6 billion for 2011 and a stock market capitalization of around $2 billion. Qatar which has a huge natural gas windfall saw their stock market go from four billion in 1998 to over $100 billion in 2010. Kazakhstan, which has a huge oil endowment, saw its stock market capitalization go from under one billion to over $100 billion in eight years. I think it very likely that Mongolia will experience similar type growth or may even exceed because of its diversity of resources including; copper, gold, coal, uranium, and various minor metals including rare earths. This will not be a straight up moon shot because quite frankly a resource based economy will suffer boom bust cycles. However I view the long term wealth generating possibilities as being phenomenal. The question is how does the average investor who has no intention of traveling to Mongolia take part. I believe I have an answer to that issue.

    Specific recommendations available to subscribers of the Actionable Intelligence Alert
    Themes: Mongolia
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  •  
    I stumbled upon this intriguing Blog while researching info on Mongolian Oil.

    Do you have any current info on the oil situation in Mongolia?

    I am a private investor and do my own research before my purchases.

    L. Walker
    Florida
    26 Jul 2011, 09:37 AM Reply Like
  •  
    Look at a compnay that is finding oil in Mongolia. Petro Matad. It trades in London and on the pink sheets in the US. I own shares.
    30 Jul 2011, 02:18 PM Reply Like
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