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Mongolia's Top 20 Index, the best performing stock market benchmark in the world for 2017

posted onSeptember 20, 2018
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On Wednesday (Sept.19, 2018) 344,510 shares of 19 firms listed as Tier I, II, and III were traded on the Mongolian Stock Exchange (MSE). The MSE ALL Index decreased by 0.01 percent to reach 19951.76 points.

The Ulaanbaatar-based bourse, Mongolia's sole stock exchange has seen rapid growth since 2006. At that time it was the world's smallest stock exchange by market capitalisation (roughly US$83 million). That grew to US$406 million by 2008 and then quadrupled again to US$2 billion by 2011. In 2010 the MSE became the world's best-performing stock market. 

In 2017, market turnover reached MNT859.2 billion, the highest in its 26 years of history and 57.2% higher than the previous record fixed in 2015. The TOP-20 index was one of the best performing indexes in the world with 68.9% increase while market capitalization gained 67.4% to reach MNT2.4 trillion updating the record of last 5 years, according to Altai Khangai, chief executive officer of the Mongolia Stock Exchange.

As of 31 December 2017, MSE had 218 listed companies, among which 19 companies are fully owned by state, 12 companies partially owned by the state, and 187 remaining companies held privately. 

In 2017, 106.1 million shares of 134 companies worth MNT 76.4 billion were traded on the MSE through 249 securities trading sessions.

In comparison to the previous year, the total number of listed shares increased by 3.2 billion or 40.3% due to the listing of 2 new companies, additional issuance of shares by 3 companies and stock split by 1 company. 

Mongolian Stock Exchange CEO
Altai Khangai, chief executive officer of the Mongolia Stock Exchange speaks during a Bloomberg interview

MSE was established in 1991 as a vehicle to implement the government's plan for privatisation of large state-owned enterprises. During the privatization period, every citizen of Mongolia started to own vouchers for the purchase of 475 state-owned companies through Mongolian Stock Exchange.

As a result of this, 96.1 million vouchers worth MNT8.2 billion were distributed to half of the total population or 1.2 million citizens.  Auctions officially began on 7 February 1992,  shares in three companies were auctioned off. By October, 121 enterprises had been floated on the exchange. Mongolia soon boasted the world's highest rate of share ownership, as more and more people redeemed their vouchers for shares.

Secondary trading began on 28 August 1995 open to both domestic and international investors and the MSE financed 29 brokerage firms were privatised.

mongolia stock exchange index
TOP-20 vs World's Major Indices in 2013 Source: MSE

In 1998 MSE joined the Federation of Euro-Asian Stock Exchanges and in 1999, the Top-75 index was introduced to the market based on the performance of the first 75 companies which ranked by their market capitalisation and average daily trading volume,  

In 2011 the MSE and London Stock Exchange Group signed the “Master Service Agreement” for the purpose of developing Mongolian capital markets in line with international standards. The next year, the Mongolian Capital Market was included in the FTSE Watch List for the further review of the possible inclusion of Mongolia as a Frontier market.  

In 2015, MSE became a self-regulatory organisation, being able to regulate its member securities companies and listed Joint Stock Companies by  integrated standards and fine companies that fail to meet regulatory requirements. 

MSE A and MSE B indices were introduced to the market starting from January 2, 2018. The MSE market cap stands at $1 billion.