Thursday, 29 July 2010

bears and bulls in Ulaanbaatar

There is a stock exchange in Ulaanbaatar. The Mongolian Stock Exchange (MSE) must be the dinkiest, sweetest exchange I have ever seen. Indeed, it is the world's smallest stock exchange by market capitalisation. It is resplendent in red and used to be the children's theatre; how apt is that? Secondary market trading (basic trading in equities) began for real in 1996 after the transtion from central planned economy to market economy (from Communist State-owned to a more Anglo-Saxon structure).

Since 1996 the MSE has traded shares worth a combined value of 39bn tugrugs/US$32m/GBP21m. This compares with the London Stock Exchange which has a daily trading value of some 13trillion tugrugs/US$11bn/GBP7bn; and against the NYSE Euronext group which has a whopping combined daily trading value of 190trillion tugrugs/US$157bn/GBP100bn. The MSE is a fairly small outfit in the scheme of things, but it is growing.

Comparatively, the MSE is a large chunk of the Mongolian economy. Total GDP in Mongolia is around US$4.2bn, the same as Guinea, Montenegro and Zimbabwe; far behind the US with US$14trillion. However, there are a couple of particularly large mining projects underway in Mongolia such as the Oyu Tolgoi copper-gold mine. Mining is widely viewed as the way forward and these projects are forecast to dramatically increase the size of the Mongolian economy, at a time when other economies are stagnant or shrinking, and catapult it onto the main stage of Asian business.

In Mongolia the National Development and Innovation Committee estimated that every US$1m output in mining generates: 51 new jobs; $115k demand in energy; increases imports by $404k; stimulates transportation and trade by $98k; $5k demand in agriculture/food; $27k demand in industry.

There is a feeling of electricity in the air around Ulaanbaatar. It has the feel you get before an enormous storm. This is a city that is about to change dramatically. It is already a great city so let's hope the change is for the better. The bull is most certainly in town.

Mongolian of the day:- money :: mong