Altai Khangai CEO Mongolian Stock Exchange Mongolian Stock Exchange: Unlocking Mongolian Capital Market Growth Potential 1
Altai Khangai
CEO
Mongolian Stock Exchange
Mongolian Stock Exchange:
Unlocking Mongolian Capital Market Growth Potential
1
Mongolian Stock Exchange and the London Stock Exchange Group
The Master Service Agreement
• The Master Services Agreement was signed on April, 7 2011 between the
State Property Committee (SPC), the Mongolian Stock Exchange (MSE) and
the London Stock Exchange for the purpose of implementing the MSE
Development Plan
• The Principle Objective of the Plan is to transform the MSE to a world class
Exchange Operator and Develop the Mongolian Capital Market as a whole
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Mongolian Stock Exchange and the London Stock Exchange Group
The Master Service Agreement: Principal Objectives
• Establishment of an appropriate regulatory framework
• Implementation of new technology
• Development of a sustainable business model for the exchange
• Training of market participants and exchange employees
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Phase1
Move to T+3 and international risk management
standardsSGF and investor protection
Q2
Q2
Development of new listing rules
Market education
Corporate governance & transparency
Phase2
Go live
02 July
Membership
rules
Remote trading via
internet
Mongolian Stock Exchange and the London Stock Exchange Group
The Master Service Agreement: High-level Project Milestones
Today
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• NEW RULES AND REGULATIONS
� Listing Rules Pending FRC approval
� Trading Rules Complete
� Membership Rules Complete
� Clearing & Settlement Rules Complete
• TRAINING
� The Academy of the London Stock Exchange has carried out a series of training programs
for regulators, market participants and other stakeholders
� The Exchange expects to launch a consultative process in the formulation of its rules
� In depth training on the new trading platform is expected to commence shortly
• A SUSTAINABLE BUSINESS MODEL FOR THE EXCHANGE
� Optimal organization structure, new roles and responsibilities
� Mid to long-term Business Development Plan adopted by the Board
Mongolian Stock Exchange and the London Stock Exchange Group
The Master Service Agreement: High-level Project Milestones
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Mongolian Stock Exchange since the strategic partnership with the
London Stock Exchange Group: Key achievements
The Principle Objective of the Plan is to transform the MSE to a world class Exchange Operator and Develop the
Mongolian Capital Market as a whole;
The Master Services
Agreement was signed
between the State
Property Committee
(SPC), the Mongolian
Stock Exchange (MSE)
and the London Stock
Exchange Group for the
purpose of implementing
the MSE Development
Plan;
April, 7 2011
July, 2 2012
Revised market
rules and
regulations (app.10)
necessary for making
Mongolian market
highly productive,
well organized, open
and transparent.
Advanced level Capital
markets training
provided by London
Stock Exchange
Academy professionals
in Ulaanbaatar and
London.
June–September
2011
2011 - 2012
Launched the integrated
Millennium IT technology,
consisting of Millennium
Exchange, Millennium CSD,
Millennium Surveillance,
Millennium Trader programs,
produced by LSEG subsidiary
Millennium IT company.
The
System
Launch
2011 - 2012
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Millennium IT: Empowering the Exchange with state of art
technology solution
Millennium IT:
Surveillance
Millennium IT:
CSD
Millennium IT:
Exchange &
Trader
Online trading
T+3 settlement system
Trading of all types of
instruments /e.g. ETFs,
derivatives/
Market making
Order specifications /Fill
or Kill, iceberg/
Real-time calculation of
indices and market cap
many more …
Real-time market
surveillance
Millennium IT system operational in:
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New Securities Market legal framework: Optimal climate for
investing in MSE
The new securities law is the gateway to promoting the principles of fair,
transparent and efficient market, creating a robust capital market and achieving
ambitious growth and development objectives in Mongolia .
Attractive listing Venue
1. Efficient procedure for
new listings
2. Dual listing opportunities
Attract foreign Investment
1. Provides legal framework for infrastructure
required to attract foreign investment.
a) Global custodian services
b) Investment fund framework
2. Higher free-float requirement -
a) Requirement to increase free-float over
time up to 30 percent
3. Investor protection –
a) Adequate disclosure requirement and
proper dissemination of information by
Issuers
b) Stringent licensing requirements for
regulated activities and professionals
working for regulated persons. This will
include the services of Broker/dealers,
underwriters custodians, investment
advisors.
c) “fit and proper test” for regulated persons
Improve market liquidity
1. New instruments such as
Depository Receipts both
Mongolian DR’s and Foreign
DR’s, Derivatives, asset
backed securities and other
instruments approved by
the commission.
2. Easier compliance
procedures for foreign PLCs
looking to list in MSE
secondary market
3. Provision for setting up of
pensions funds
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Mongolian Stock Exchange and FTSE Group: A New Frontier Market
• The Mongolian capital market has been placed on FTSE’s Watch List for possible promotion to
Frontier market status.
• FTSE assumes a major position in global financial market and enjoys an unparalleled reputation for
provision of indices and market data that many international investors an investment funds base
on to make informed investment decisions.
• The implementation of a world standard
trading and settlement system and market
infrastructure and increased transparency in
the market had a major influence in placing
Mongolia on a Watch list for possible promotion
to Frontier market status.
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0
10
20
30
40
50
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Market Capitalization Market Cap/ GDP
Capital Markets Performance
Recorded the highest market cap
in Feb 2011 in Mongolian capital
market history, reaching USD 2.5
billion.
Market cap to GDP is app. 20%
(32% at its peak)
Market cap in 2011: +57.8%
Daily turnover in 2011: +74.5%
TOP-20 index in 2011: +47%
Mongolia placed on FTSE Frontier
Market Watch-list
Oct 2012 2011 2010
Market Cap (in USD bln) 1.23 1.62 1.03
Equity Trading Value
(in USD mln)103 78 45
Equity Trading
Volume (bln shares)131.1 122.8 64.5
Daily share turnover
(in thousand USD)510.4 311.2 178.6
No. of Members 80 76 45
No. of Listed Companies 330 332 336
TOP 20 Index 17106.9 21687.57 14759.81
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Opportunity to grow with
the fastest growing market
Mongolia’s GDP in 2011:
+17%
International standards
offered domestically
(Millennium IT technology,
revised rules & regulations,
T+3 settlement system)
Mongolian Stock Exchange – Potential listing venue
-60
-30
0
30
60
S&P 500
NASDAQ
FTSE 100
DAX
CAC 40
Nikkei 225
Hang Seng
+861.28%
60
560
1060
1560
In p
erc
enta
ge
MSE TOP-20 Index in comparison with the global indexes
TOP-20
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Mongolian Stock Exchange: A Venue of choice for
Growth-oriented companies
0
40
80
120
160
Gainers Stable Fallers
Num
ber
of
com
panie
s
Main gainers Sector 1 year returnMarket cap, in mln.
USD
Mongol Shiltgeen Restaurant, Hotel services 42,9 % 7,2
UB Hotel Restaurant, Hotel services 31,9 % 17,5
Remicon Concrete manufacturer 20,5 % 10,2
Talkh chikher Food 20 % 8,8
Suu Food 14,3 % 19,8
Tavantolgoi Mining -31,6% 303,11
APU Food 9,3% 187,6 12
MSE looking to the future: The market of choice for small to
mid-cap companies looking to maximize their growth potential
• One of the smallest exchanges with the biggest potential
• The market of choice for companies and investors looking to participate in Mongolia
growth story
• Higher visibility of MSE companies and development of liquidity through new product
initiatives including:
� The promotion of equity research
� Development of new indices
� Hosting Company Investor days
• Driving growth through following initiatives:
� Mongolian top strategic deposits
� Foreign listed companies in mining sector with assets in Mongolia
� Leading domestic companies in mining, infrastructure and consumer sectors
� State-owned enterprises planned to be privatized
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Investor conferences
Past events:
IPO Mongolia conference: organized in Ulaanbaatar on 07 March 2012
and 300 investors and 20 potential listing companies participated.
Mongolia Capital Markets Day: co-organized with London Stock
Exchange in London on 30 April and 1 May, 2012, for 250 international
investors.
Mongolia London Business Forum: co-organized with Mongolia-British
Chamber of Commerce & Mongolian Embassy in the UK in London on 30
July 2012 for 200 investors and business representatives from Mongolia
and the United Kingdom.
Upcoming events:
Economic Dialogue & Invest Mongolia, co-organized with Consulate of
Mongolia to Hong Kong and Macau SARs in Hong Kong on 26 November
2012 (aim to making this free, annual event)
Mongolia Investment Congress & Clean Coal Asia Summit, co-
organized with INBC Global, in Shanghai on 10-12 December 2012
Increasing investor awareness while attracting more companies to be listed on MSE
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