Mongolian bourse seeks foreign investment

HONG KONG The Mongolian Stock Exchange, the smallest bourse in the world, said that it expected to attract $100 million worth of initial public offerings and bond sales next year as companies seek money to expand. The new sales will consist of five equity and 20 corporate bond offerings, mostly from mining companies, Dayanbilguun Danzan, a board member of the exchange, said during an interview in Ulan Bator, the Mongolian capital. Mongolia, which built the world's largest-ever contiguous land empire in the 13th century under Genghis Khan, is seeking to lure more overseas investments into industries like mining, infrastructure and tourism. The country's economy grew at a rate of 6.2 percent to $1.9 billion last year, according to Fitch Ratings. The Mongolian exchange has a total market value of about 97 billion tugriks, or $83 million, according to its latest weekly report. That puts the bourse last, according to the World Federation of Exchanges. By end of this year, Zoloton, a gold- mining company based in Ulan Bator, is expected to sell 1 billion tugriks of shares in an initial public offering, Dayanbilguun said. The Mongolian government is also seeking to raise as much as $500 million from an international bond sale. The country currently has only Treasury bills. Mining, the most important industry in Mongolia, represented 18 percent of the economy and 76 percent of exports in 2005, according to data from the Ministry of Industry and Trade. Foreign direct investment in prospecting, oil exploration and mining was $191 million last year, or 61 percent of the total from overseas. The country claims to have the largest copper deposit in Asia. The Oyu Tolgoi mine, in southern Gobi, has 24 million tons of copper in reserve, which is more than one year of global consumption. The mine also has 800 tons of gold in reserve, about one-fifth of world demand last year. "We're introducing more IPOs, especially from mining and tourism companies, to make trading more active," Dayanbilguun said. About 85.8 million tugriks worth of shares from 21 companies were traded last week, according to the exchange. Trading volume last year was 20 billion tugriks, Dayanbilguun said. The Financial Regulatory Commission will ask the 40 most inactive companies to delist from the exchange, said D. Bayarsaikhan, the chairman. The country needs to encourage more companies to sell shares and improve the bond market, Bayarsaikhan said. "For foreign investors, we do think it's profitable to invest in, especially mining and tourism companies," Dayanbilguun said. Shares are traded Monday through Friday for one hour from 11 a.m. to noon by 25 dealers on the trading floor. The bourse was established in 1991 as the country started privatizing state- owned companies. The bourse, now 100 percent government owned, is seeking to become a private company next year, Dayanbilguun said.