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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

New Securities Law Allowing Dual Listings to be Passed in Mongolia

By Elena Fehrbach

Apr. 10 – The new draft of the Securities Law has just been introduced for the discussion at the spring session of the Parliament which started on April 5. The suggested draft has been in the process of revision for more than 1 year and is expected to become a game- change regulation allowing dual listing.

According to Mr. Altai Khangai, the Chief Executive of the Mongolian Stock Exchange (MSE), the adoption of the revised law could potentially bring the MSE’s stock capitalization to almost 40 billion USD value compared to today’s 1.2 billion USD capitalization, as a result of much better liquidity. He emphasizes the importance of the actual legal regulation being in place, as more and more companies with Mongolian assets listed on international stock exchanges are looking for listing on MSE as well.

Based on the performance of stock exchanges operating in Asia, MSE has the worst performance rate, showing the benchmark MSE Top 20 index falling 11 percent this year. The new regulation is expected to help Mongolia to revitalize the foreign investment situation which currently demonstrates the 40% drop in the amount of foreign direct investments (equity) compared to the same period in the previous year. Such significant decline in the FDI level in Mongolia might be the consequence of fast introduction on the Strategic Foreign Investment Law in May 2012 which is currently in the process of improving amendments approval.

If implementation of the new Securities Law is successful in bringing the total capitalization of the MSE to 40 billion USD, as assumed by the Mr. Altai Khangai, MSE will be the 16th largest stock exchange in the Asia Pacific region following Vietnam.

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