Central Asia Mutual Fund Strikes Beyond The Hurdles That Come In Its Way

Sep. 11, 2013 7:39 AM ET
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The debutante of 2013, Central Asia mutual fund, was designed to expose the broad based equity performance of Central Asia. Vulnerable to S&P's it allocates 13.96 percent of its weight to Mongolia after Kazakhstan and Russia. This fund is one of the financial vehicles that provide a transparent exposure to Kyrgyzstan and Tajikistan. The Central Asian economies are extremely rich in the resources and have a very steady growth rate. Mongolia is one of the largest producers of coal and of lately a hustle bustle in the Coal market has been bringing vibrations in the inflow of foreign investments into this sector. The Gobi desert in Mongolia is the richest region in Mongolia with an abundance of copper, gold and silver deposits. These resources have initiated and attracted foreign investors willing to provide funds for the processing and utilization of this treasure. A fine example of this is the association of one of the biggest Australian mining giants that have brought their interest in this region. China recently has also shown its investment interest by opening a $962 million railway infrastructure with Kazakhstan through the Korgas Pass.

A forecast of 5.5% of growth in GDP by the International Monetary Fund in 2013 for the energy-exporting Central Asian countries has been anticipated in this region. There have been good prospects of growth in trade with China and the Central Asia region, bringing wonderful results regarding the level of investment inflows.

Kazakhstan has remarkable figures of producing over 116 million metric tons of coal in the last year.

The asset breakup with respect to the industry break down shows heavy weight age taken up by the Materials and Energy Minerals sectors. Both of which amounts to nearly 39% of the total allocations together, after which follow the Financials sector and Oil & Gas Sector.

These economies are under demographic pressures with a major demographic trend of a young population. The Solactive Central Asia and Mongolia Index gather revenues from Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. After the division and breakup of the Soviet Union, these economies had a very big challenge in front of them. They had to prove their potential to the world economies, and only had the advantage of adequate natural resource on their side. The major shopper for these resources was neighboring china that availed full advantage of the fuel resources and invested hugely in the infrastructure of transportation possibilities of the fuels. Mongolia's Tavan Tolgoi coal mine was hugely invested in by China as the mining operations were affected by the financial crises. China posed as the most reliant financial investor to build its confidence in the trade. China has invested in plenty in this region like the investment of the pipeline from the Caspian shore to Xinjiang.

An important recent analysis relating to Mongolia's fiscal and external profiles has shown that there could be news of deterioration in the next year if there isn't a significant improvement in policymaking. The government requires restructuring its borrowing, public spending focusing more on the business environment.

The trade policies of these economies are extremely business friendly and transparent. Not too fussy and oriented towards the improvement in trade ties with the neighboring countries. Mongolia mutual fund and Central Asia mutual fund are the winners in the scenario and further help the investors to cheap exposure of the companies playing with high potential in the region belonging to the respective funds.

Global X Central Asia ETF [AZIA] provides exposure to Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan and their most potential companies belonging to the Central asia mutual fund and Mongolia fund. Introduced in the February of 2013 it delivers as per the performance of Solactive Central Asia and Mongolia Index. This fund associates thirty percent of its concentration towards Kazmunaigas Gdr, Eurasian Natural Resources Corp and Kazakhmys Plc.

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