Mongolian Capital Market Overview

25 March, 2009

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Mongolian Capital Market Structure

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1991 : Privatization1995 : Secondary market began2000 : Government bill2001 : First corporate bond2005 : First IPO companies2007 : Bull market in the stock market2008 : Stock market decline

Capital Market in Brief

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- Regulator:

Financial regulatory commission- A center for trading listed securities:

Mongolian Stock Exchange- An organization that engages in securities clearing and

depository activities:

Securities Clearing House and Central Depository

The professional institutions

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- 43 brokerage and dealing companies (Member of MSE)

- 12 Underwriting companies- 4 Investment advisory companies

Intermediate organizations

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376 listed companies

Securities Issuers

There are 376 listed companies listed in the Mongolian stock exchange. 22 of them are held by state for 100%. 346 listed companies constitute the current market capitalization.

In 2008, Financial Regulatory Commission temporary suspended the 166 listed companies which have not reported the financial results in recent years out of MSE listing. Now, stocks of 180 listed companies are traded on the Mongolia Stock Exchange.

10 bond issuers10 companies have issued corporate bonds since 2001. These 10 companies issued the bonds in MNT, except MCS electronics LLC and Monfresh JSC which have issued USD bond.

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- Stock- Corporate bond- Government bond

Investment products on Mongolian capital market

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- Brokerage- Underwriting - Investment Advisory

Services on Mongolian capital market

FOLLOWING ACTIVITIES WILL BE INTRODUCED IN NEAR FUTURE

- Custodian service

- Investment management

- Mutual fund

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Service; 87

Manufacturing, 60

Mining; 21Food, 40

Construction; 61

Agriculture, 73Energy; 4

Listed companies by sector

Total 346 listed companies are divided into above 7 sectors; 87 companies from service sector, account for 38,51%, 60 companies from manufacturing sector, account for 28,29%; 21 companies from mining sector, account for 20,64%; 40 companies from food sector, account for 10,49%, 61 companies from construction sector, account for 1,45%, 73 companies from agriculture sector, account for 0,47%; 4 companies from energy sector, account for 0,14% of total Market capitalization.

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Listed companies by sector   Sector

Number of company

Market capitalization Proportion in total market cap

1 Service 87 173 669 222 842 38,51%

2 Manufacturing 60 127 545 568 991 28,29%

3 Mining 21 93 075 693 293 20,64%

4 Food 40 47 315 838 487 10,49%

5 Construction 61 6 548 642 291 1,45%

6 Agriculture 73 2 133 063 774 0,47%

7 Energy 4 641 529 992 0,14% 

Total Market Cap /March 26, 2009/ - 450 929 559 670 MNT

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Major Indicators of Mongolian Capital

Market

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Jan

Feb

Mar

Apr

May Jun

Jul

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

2006 2007 2008 2009

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000 466`644 mln MNT

Total market capitalization /in million MNT/

Market capitalization at the end of 2008 reached 515,872 million MNT, which was a record. It’s worth mentioning that in December 1998 the price per share of Mongolia’s top 20 businesses (The Top 20 Index is calculated by multiplying the number of traded securities by their market price) was about 200 MNT, in December 2008 the price per share rose to 5,700 MNT. As for March 2009, the market capitalization has decreased by 12.53 percent or 64,655 million MNT, comparing to December 2008.

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Index Started date Last close 25 Mar, 2009

Number of companies in

index

Proportion in capital market

MSE Top 20 index

August, 1995 5014.43 20 62.60%

BDS index June, 2006 842.98 25 63.43%

BDS IPO index June, 2006 205.33 10 27.23%

Major Indices on Mongolian Capital Market

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06/0

6/23

06/0

7/27

06/0

8/30

06/1

0/03

06/1

1/06

06/1

2/10

07/0

1/13

07/0

2/16

07/0

3/22

07/0

4/25

07/0

5/29

07/0

7/02

07/0

8/05

07/0

9/08

07/1

0/12

07/1

1/15

07/1

2/19

08/0

1/22

08/0

2/25

08/0

3/30

08/0

5/03

08/0

6/06

08/0

7/10

08/0

8/13

08/0

9/16

08/1

0/20

08/1

1/23

08/1

2/27

09/0

1/30

09/0

3/05

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

Trading volume BDS INDEX Moving average (BDS INDEX) Moving average (BDS INDEX)

Mln MNT

BDS Index

BDS: 842.98

BDSec Joint Stock Company has been calculated BDS Index since June 23, 2006 with a purpose of only representing the movements and the trends in the Mongolian Capital Market. BDS Index has 25 member stocks which are rated by BDSec JSC as standard. The member stocks represent the leading 7 sectors in Mongolia.

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-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

MSE TOP 20 Moving average (MSE TOP 20) Moving average (MSE TOP 20)

MSE TOP 20 INDEX

MSE TOP 20: 5014.43

MSE Top-20 index is modified in every half year. By the end of 2008, poorly performed 5 stocks disqualified from MSE Top-20 index which soon after added by 5 new stocks have demonstrated outstanding performance throughout 2008. 5 disqualified stocks: APU (APU), Darkhan nekhii (NEH), Eermel (EER), Makhimpex (MMX), Moninjbar (MIB), Zoos goyol (ZOO). 5 new stocks: HBOil (HBO), Hermes center (HRM), Khuh gan (HGN), Mongol savkhi (UYN), Naco fuel (NKT), Tavan tolgoi (TTL).

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2006

Jan

Mar

May Ju

lSe

pNov

2007

Jan

Mar

May Ju

lSe

pNov

2008

Jan

Mar

May Ju

lSe

pNov

2009

Jan

Mar

-

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

March: 110.48 mln MNT

Daily average turnover

As for March 2009, average daily turnover 110.47 million MNT, comparing this data with the 2008 peak period in May, the daily turnover has declined 90.57 percent or 1,060.5 million MNT, but comparing to December 2008, has increased by 66.51 percent or 73.47 million MNT.

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Equity trading

 

Trading day

Volume Value

Total Daily average Total Daily average

2008 Jan 22 11 372 700 516 941 3 546 000 000 161 181 818 Feb 20 3 584 500 179 225 1 929 800 000 96 490 000 Mar 21 5 976 900 284 614 3 743 800 000 178 276 190 Apr 22 3 391 900 154 177 3 161 100 000 143 686 364 May 22 55 620 300 2 528 195 25 762 500 000 1 171 022 727 Jun 21 17 105 900 814 567 4 936 100 000 235 052 381 Jul 22 18 315 400 832 518 6 671 100 000 303 231 818 Aug 21 37 341 422 1 778 163 4 754 226 582 226 391 742 Sep 22 4 222 500 191 932 2 887 100 000 131 231 818 Oct 23 4 730 316 205 666 1 032 033 558 44 871 024 Nov 19 6 129 904 322 627 1 185 197 289 62 378 805 Dec 23 2 356 322 102 449 740 404 704 32 191 509

2009 Jan 21 2 399 925,0 114 282 472 563 290 22 503 014 Feb 18 12 291 065,0 682 837 1 382 277 514 76 793 195 25-Mar 18 651 920 36 218 1 988 620 767 110 478 932

The volume of stock trade in first three months of this year has decreased by 53.31 percent or 2.4 times, comparing to first three months of last year.

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Most actively traded stocks in 2008

Company name Traded volumeProportion in the

total trading volume

Company name Traded valueProportion in

the total trading value

Khuh gan 38 403 345 22,57% Anod bank 4 122 880 255 39,97%

Remicon 34 812 954 20,46% Khuh gan 4 235 970 771 7,02%

Hermes center 32 957 178 19,37% Remicon 3 481 295 400 5,77%

Anod bank 21 873 030 12,86% GTB 3 289 729 638 5,45%

GTB 15 994 409 9,40% Hermes center 3 218 593 742 5,33%

Naco fuel 7 704 015 4,53% BDSec 2 710 768 759 4,49%

HBOil 4 032 259 2,37% Shariin gol 2 439 452 841 4,04%

Olloo 3 223 418 1,89% Zoos bank 2 059 064 785 3,41%

UID 974 119 0,57% Naco fuel 2 021 677 934 3,35%

BDSec 891 194 0,52% Nic 1 573 359 467 2,61%

TSU 800 291 0,47% HBOil 1 299 210 806 2,15%

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Most actively traded stocks /1 Jan, 2009 - 25, March, 2009/

Company name Traded volumeProportion in the

total trading volume

Company name Traded valueProportion in the

total trading value

Remicon 12 247 635 79,83% Tavan tolgoi 1 904 344 169 49,55%Khuh gan 1 108 917 7,23% Remicon 1 224 763 500 31,87%Olloo 838 440 5,46% Suu 150 255 900 3,91%GTB 364 011 2,37% Zoos bank 103 237 403 2,69%APU 130 559 0,85% Khuh gan 101 166 613 2,63%Suu 113 742 0,74% Olloo 62 883 000 1,64%Chatsargana 97 015 0,63% APU 55 996 533 1,46%Moninjbar 93 574 0,61% Gobi 36 595 148 0,95%UID 63 735 0,42% GTB 34 327 699 0,89%Erdenet zandan 40 929 0,27% Chatsargana 26 194 050 0,68%Zoos bank 40 808 0,27% Nic 23 804 403 0,62%Nic 40 533 0,26% Baganuur 14 182 782 0,37%Tavan tolgoi 36 793 0,24% UID 13 141 462 0,34%

During this period, majority of stock traded on the market were Tavan tolgoi (TTL). Trade value of this stock`s represents over 49 percent of total stock trade.

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  Company nameType of offering

Number of offering share

Total raised capital

1 HBOil FPO 2 000 000 600 000 000 2 GTB FPO 2 100 000 482 900 000 3 Hermes center IPO 23 562 900 2 356 290 000 4 Remicon IPO 100 000 000 2 700 000 000 5 Anod bank IPO 18 530 000 20 400 000 000 6 Naco Fuel IPO 11 000 000 900 000 000 7 BDSec FPO 1 000 000 2 700 000 000 8 Khuh gan IPO 30 000 000 3 300 000 000

New issued in 2008

In the 2008, 5 companies issued initial stocks and 3 companies released additional stocks, which accumulated total financing of 33.5 billion MNT. During this period, 55.51 percent of total stock trade value were new and additional stocks. Seeing from it, these new stocks played a major role in the whole stock trade process over this time.

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20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08 -

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

1,204.33

2,958.02

2,988.30

2,776.46

2,663.71

960.89

849.98 502.00

Volume /in thousand MNT/ Value /in million MNT/

Corporate bond trading

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- Corporate bond trading amount has decreased by 347.9 million MNT or 40.94% compared to previous year. In 2008, only Moninjbar bond accounted 41,83%. “Moninjbar” JSCompany started issuing 120 thousand bonds at a face value of 10,000 MNT under the name “Accomplishment”. The maturity date of the bond is 2 years at a coupon rate of 11.11 percent. Moninjbar will use the fund for the “40 thousand residential apartments” program, on improvements of Ulaanbaatar and rural area infrastructure, and to carry out technical modernization. In addition to construction, Moninjbar engages in building public utilities’ objects such as heating stoves and engineering lines.

- As commercial banks’ interest rates have been dramatically decreased over past several years, corporate bond issuances in Mongolia are significantly downsizing in last 2 years. Companies are usually keen to finance their short term investment through bank loans and raise their long term investment from capital market by selling their shares.

Corporate bond trading

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1996

2000

2001

2002

2003

2004

2005

2006

2007

2008

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5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

-

50

100

150

200

250

300

350

400

450

500

144

11,132

30,750

41,691

21,723

12,464

6,768 4,462

39,599

1,495

Volume /in thousand MNT/ Value /in million MNT/

Discounted government bond trading

During this period, 1,5 billion MNT or 30 percent bonds of the low-value government bonds issued in 2008 were traded. The main reason for such low trade of the government bonds was the fact that the Central Bank raised its security interest rate in order to protect against inflation,which initiated commercial banks to purchase the Central Bank’s securities.

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- Easy to invest- Emerging and growing market - Undervalued stocks- Promising P/E - Active trading, increased volumeNo limitation for foreigners:- No special regulation for foreign investors- There is no investment amount limitation for foreigners- According to Mineral law of Mongolia, every mining company

that owns strategic mineral deposit has to issue no less than 10 % of their total share on Mongolian stock exchange.

Low tax- There is no tax imposed on dividends.- Since 2007, Value Added Tax decreased to 10% from 15%.- Income tax reduced to 10% /Both individuals and entities/

Why invest Mongolia

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Contact details:

Contact Person:

Dayanbilguun Danzan Direct: +976-99112846

BDSEC JSC Email: bdsec@bdsec.mn

Zaluuchuud Avenue 27/1, Empire Building

Sukhbaatar District, Ulaanbaatar, Mongolia

Pho: +976-11-321763 Fax: +976-11-323411

BDSEC JSC

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