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Mongolia Finally Passes New Securities Law

|Includes: MNGGF, Turquoise Hill Resources Ltd. (TRQ)


Mongolia's parliament finally passed a long-awaited securities law on Friday that will allow the state-owned firm mining the enormous Tavan Tolgoi coal deposit to launch a $3 billion initial public offering at home and overseas.

Khangai Altai, the chief executive of the fledgling Mongolian Stock Exchange said the new law would also help attract more companies to the exchange by introducing international standards, adding that it could eventually bring total market capitalisation to around $30-$40 billion, from only around $1.3 billion at present.

According to a statement issued by the exchange, the law will allow companies to list on multiple markets, enabling those currently operating in Mongolia but listed on overseas bourses to launch IPOs at home as well.

The new legislation is also an essential part in allowing Erdenes Tavan Tolgoi LLC, the state-owned miner of the coveted Tavan Tolgoi coking coal project, to list in London and possibly Hong Kong.

The cash-strapped state-owned developer, Erdenes Tavan Tolgoi, has been planning to list the eastern Tsankhi block of the Tavan Tolgoi project for years, but the fundraising has been repeatedly delayed. The company said in January that it would not happen this year.

The passing of this law was one of catalysts I was waiting for with regard to the next upleg in the economy in Mongolia. The market there is off around 35% since Jan 1, 2013 and the economy has slowed to a growth rate of 7%. This has, in my view, put the fear into the politicians in Mongolia who are now doing what is necessary to make Mongolia a place attractive to capital. They have to repair the damage they caused by enacting the kneejerk nationalistic policies last year. However I think they have mostly learned a lesson. The next major catalyst will be the announcement of concentrate shipments from Oyu Tolgoi sometime next month. I have been selectively buying shares in Mongolia. Names like brewer and spirits maker APU, ready mix provider Remicon, and securities broker with over 80% market share BDSEC, along with E-Trans Logistics. I also continue to like Mongolia Growth Group which trades in Canada. Turquoise Hill is another one I have bought as

Disclosure: I am long TRQ, OTCPK:MNGGF.