Mongolian Stock Exchange
Encyclopedia
The Mongolian Stock Exchange (MSE) (Mongolian
: Монголын Хөрөнгийн Бирж/Mongolyn Khöröngiin Birj), located in Ulan Bator, is Mongolia
's sole stock exchange
. It was established in January 1991 by the decree of the Mongolian Government to privatize state-owned assets, it was the world’s best-performing stock market after a run-up of 121 per cent in 12 months. It is regulated by the Financial Regulatory Commission of Mongolia.
Its main index
is MSE Top-20 and has 336 companies listed in 2010. The total market capitalization of its listed companies was around US$2 billion on 2011 after quadrupling from 2008 when it was US$406 million.
was established to take their orders. Red vouchers worth MNT3,000 were also issued for the purchase of the assets of small enterprises which would not be listed on the exchange; unlike the blue vouchers, these could be traded in secondary markets. Initially, stock exchange officials hoped to privatise 80% of state assets, but, on 7 June 1991, Government Resolution No. 170 announced that the state would retain a stake of 50% in some large enterprises; mining, energy, transportation, communications, and water supply companies were excluded from the privatisation scheme entirely.
Auctions officially began on 7 February 1992; shares in three companies were auctioned off. The first day's turnover was 16,000 shares, valued at US$
15,000; that grew by over twelve times to 200,000 shares in March. Auctions continued to be held weekly; regional brokers collected vouchers and share orders from individuals, and submitted bids through their floor traders in Ulan Bator. Communication was often accomplished by modem
. Trading hours were restricted to two hours on one day per week, expanding to two five-hour days per week in July; the thirty exchange officials used the remainder of their working time to prepare infrastructure and legal recommendations for trading in the secondary market
. 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. Family members were permitted to transfer their vouchers to each other, so not everyone became a stockholder, but the peak number of shareholders was estimated at one million, or 43% of the population at the time. In the end, a total of 475 companies worth MNT17.33 billion were privatised by auctions and listed on the Mongolian Stock Exchange, including MNT5.04 billion worth of manufacturing companies, MNT4.09 billion of agricultural companies, MNT1.27 billion of construction companies, MNT1.25 billion of state farms, MNT580 million of trading companies, MNT520 million of transport companies, and MNT280 million of companies in other sectors. Some sources suggest that illegal trading in vouchers occurred in advance of the privatisations; however, statistics from the exchange itself show that the number of shareholders each enterprise initially emerged with corresponded roughly to the number of shareholders one would expect if each shareholder had spent all his vouchers to purchase shares in a single enterprise. This initially led to a very equitable distribution of shares; individuals found themselves unable to buy more shares, or sell the ones they already had, until the government passed a new securities law.
Secondary trading finally began on 28 August 1995, open to both domestic and international investors. Bids were placed on 430 out of 475 listed stocks, and trading occurred in 16 stocks; total turnover was 12,776 shares worth MNT2.2 million tugriks (US$4,850). The largest gain was in Sor, which rose by 19% from MNT580 to MNT690. However, the secondary market quickly exposed the weakness of many of the newly privatised companies; share prices remained depressed throughout 1996, and the number of MSE-listed companies contracted from 475 to 402. Market capitalisation stabilised around MNT15 billion in 1997, with a daily turnover of 80,000 to 300,000 from MNT16 - 80 million. Furthermore, many small shareholders sold their shares, allowing a few domestic and foreign investors to gain majority holdings in the remaining listed companies. The total number of shareholders had shrunk to a mere 135,000 by 1997. One public offering of additional shares from an already-listed enterprise was carried out in 1996, but the regulators refused to give approval for initial public offering
s by new private companies, due to the lack of regulation and experience in underwriting
. In 1998, the exchange moved to electronic trading. In 2000, the exchange also began to offer trading facilities for Mongolian government bonds. As of December 2003, market capitalisation in local terms had expanded to MNT52 billion, which was still a mere 5% of GDP. Only 30 of the companies listed on the exchange were actively traded.
Government bonds, rather than stocks, came to be the Mongolian Stock Exchange's biggest business as soon as they began being auctioned through the exchange in November 2000; previously, they had been sold directly to banks. The following year, the Barilga Corporation, a construction company, became the first to sell corporate bonds through the MSE, with a USD4.4 million issue. In 2004, bond trading accounted for 96% of total securities turnover on the exchange. By that same year, the stock market had recovered somewhat as well, but retail investors remained suspicious of trading due to volatility and lack of transparency; MSE officials estimated that 80% of listed companies were majority-owned by private individuals. By February 2007, trading hours had expanded to one hour on each weekday. Weekly stock turnover at 7 September 2007 was 1.8 million shares valued at MNT1.7 billion, while 50,000 government bonds traded for a total consideration of MNT4.8 billion. Furthermore, the number of registered shareholders bounced back to 483,100, three-and-a-half times the figure a decade earlier, and nearly half the peak number seen in 1995 after privatisations had completed. Total market capitalisation as of September 2006 was MNT97 billion (US$83 million).
Although, the Mongolian Stock Exchange used to be the world's smallest stock exchange by market capitalisation in 2006, it has become the world's best performing stock market in 2010. Its market capitalization quadrupled to $2 billion in end of 2011 from 2008 and is speculated that it can get to $45 billion in five years.
. To commemorate their 16th anniversary, they organised a sports day, in which broker-dealers and the exchange fielded teams and competed against each other. They were also described as "punching above its weight" in its international knowledge-sharing efforts. It joined the Federation of Euro-Asian Stock Exchanges
in 1998, and in June 2006 formed a partnership with the Korea Exchange
. The chief executive officer
of the Mongolian Stock Exchange visited the Korea Stock Exchange in July 2007; officials from the Korea Stock Exchange paid a return visit the following month.
Mongolian Stock Exchange sealed a deal with London Stock Exchange Group to modernize the MSE under an agreement to make it in level of world standard. LSE will manage and provide expertise and someone from LSE might lead the MSE. This comes as there is a mining boom happening in Mongolia and need for robust, private and attractive stock exchange.
, next to the headquarters of Mongolia Telecom and across from the Mongolian parliament's buildings. It was refurbished at a cost of US$4.5 million prior to the official start of trading; seats and screens were removed, a trading floor
was created and equipped with computers, and automatic sinks were installed in the bathrooms. The building itself is a pink-and-white neo-classical-style structure. One corner of the building has been partitioned off to serve as an internet cafe
. Due to the color of its building, the Financial Times
correspondent, Leslie Hook, defined it the pink house of equities.
and later studied finance at the Harvard University
in the United States
, and founded the Mongolian Stock Exchange when he was only 27 years old. His young age prompted American magazine Asia, Inc. to dub him "the Boy Wonder of the Mongolian Stock Exchange"; he acknowledged that his rapid career progress "could only happen in a place like Mongolia". His older brother, Naidansurengiin Zhargalsaikhan, was formerly head of the Bank of Mongolia
, but was ousted from his job after the loss of US$100 million of foreign reserves, which had been invested in futures and foreign currency.
The current chairman, B.Bold, is the CEO of Newcom Corporation and former head of J.P.Morgan's department of Russia and commonwealth nations.
Mongolian language
The Mongolian language is the official language of Mongolia and the best-known member of the Mongolic language family. The number of speakers across all its dialects may be 5.2 million, including the vast majority of the residents of Mongolia and many of the Mongolian residents of the Inner...
: Монголын Хөрөнгийн Бирж/Mongolyn Khöröngiin Birj), located in Ulan Bator, is Mongolia
Mongolia
Mongolia is a landlocked country in East and Central Asia. It is bordered by Russia to the north and China to the south, east and west. Although Mongolia does not share a border with Kazakhstan, its western-most point is only from Kazakhstan's eastern tip. Ulan Bator, the capital and largest...
's sole stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
. It was established in January 1991 by the decree of the Mongolian Government to privatize state-owned assets, it was the world’s best-performing stock market after a run-up of 121 per cent in 12 months. It is regulated by the Financial Regulatory Commission of Mongolia.
Its main index
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
is MSE Top-20 and has 336 companies listed in 2010. The total market capitalization of its listed companies was around US$2 billion on 2011 after quadrupling from 2008 when it was US$406 million.
Role in privatisation of state assets
The Mongolian Stock Exchange was established in 1991 as a vehicle to implement the government's plan for privatisation of large state-owned enterprises. In an attempt to ensure an equitable distribution of assets, the Mongolian government chose to instantiate a voucher-based scheme; one blue voucher worth MNT7,000 was issued to every citizen born before 31 May 1991 for the purchase of shares in large enterprises, and a nation-wide network of 29 brokerage housesStock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
was established to take their orders. Red vouchers worth MNT3,000 were also issued for the purchase of the assets of small enterprises which would not be listed on the exchange; unlike the blue vouchers, these could be traded in secondary markets. Initially, stock exchange officials hoped to privatise 80% of state assets, but, on 7 June 1991, Government Resolution No. 170 announced that the state would retain a stake of 50% in some large enterprises; mining, energy, transportation, communications, and water supply companies were excluded from the privatisation scheme entirely.
Auctions officially began on 7 February 1992; shares in three companies were auctioned off. The first day's turnover was 16,000 shares, valued at US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
15,000; that grew by over twelve times to 200,000 shares in March. Auctions continued to be held weekly; regional brokers collected vouchers and share orders from individuals, and submitted bids through their floor traders in Ulan Bator. Communication was often accomplished by modem
Modem
A modem is a device that modulates an analog carrier signal to encode digital information, and also demodulates such a carrier signal to decode the transmitted information. The goal is to produce a signal that can be transmitted easily and decoded to reproduce the original digital data...
. Trading hours were restricted to two hours on one day per week, expanding to two five-hour days per week in July; the thirty exchange officials used the remainder of their working time to prepare infrastructure and legal recommendations for trading in the secondary market
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
. 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. Family members were permitted to transfer their vouchers to each other, so not everyone became a stockholder, but the peak number of shareholders was estimated at one million, or 43% of the population at the time. In the end, a total of 475 companies worth MNT17.33 billion were privatised by auctions and listed on the Mongolian Stock Exchange, including MNT5.04 billion worth of manufacturing companies, MNT4.09 billion of agricultural companies, MNT1.27 billion of construction companies, MNT1.25 billion of state farms, MNT580 million of trading companies, MNT520 million of transport companies, and MNT280 million of companies in other sectors. Some sources suggest that illegal trading in vouchers occurred in advance of the privatisations; however, statistics from the exchange itself show that the number of shareholders each enterprise initially emerged with corresponded roughly to the number of shareholders one would expect if each shareholder had spent all his vouchers to purchase shares in a single enterprise. This initially led to a very equitable distribution of shares; individuals found themselves unable to buy more shares, or sell the ones they already had, until the government passed a new securities law.
Secondary market
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Secondary trading finally began on 28 August 1995, open to both domestic and international investors. Bids were placed on 430 out of 475 listed stocks, and trading occurred in 16 stocks; total turnover was 12,776 shares worth MNT2.2 million tugriks (US$4,850). The largest gain was in Sor, which rose by 19% from MNT580 to MNT690. However, the secondary market quickly exposed the weakness of many of the newly privatised companies; share prices remained depressed throughout 1996, and the number of MSE-listed companies contracted from 475 to 402. Market capitalisation stabilised around MNT15 billion in 1997, with a daily turnover of 80,000 to 300,000 from MNT16 - 80 million. Furthermore, many small shareholders sold their shares, allowing a few domestic and foreign investors to gain majority holdings in the remaining listed companies. The total number of shareholders had shrunk to a mere 135,000 by 1997. One public offering of additional shares from an already-listed enterprise was carried out in 1996, but the regulators refused to give approval for initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
s by new private companies, due to the lack of regulation and experience in underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
. In 1998, the exchange moved to electronic trading. In 2000, the exchange also began to offer trading facilities for Mongolian government bonds. As of December 2003, market capitalisation in local terms had expanded to MNT52 billion, which was still a mere 5% of GDP. Only 30 of the companies listed on the exchange were actively traded.
Government bonds, rather than stocks, came to be the Mongolian Stock Exchange's biggest business as soon as they began being auctioned through the exchange in November 2000; previously, they had been sold directly to banks. The following year, the Barilga Corporation, a construction company, became the first to sell corporate bonds through the MSE, with a USD4.4 million issue. In 2004, bond trading accounted for 96% of total securities turnover on the exchange. By that same year, the stock market had recovered somewhat as well, but retail investors remained suspicious of trading due to volatility and lack of transparency; MSE officials estimated that 80% of listed companies were majority-owned by private individuals. By February 2007, trading hours had expanded to one hour on each weekday. Weekly stock turnover at 7 September 2007 was 1.8 million shares valued at MNT1.7 billion, while 50,000 government bonds traded for a total consideration of MNT4.8 billion. Furthermore, the number of registered shareholders bounced back to 483,100, three-and-a-half times the figure a decade earlier, and nearly half the peak number seen in 1995 after privatisations had completed. Total market capitalisation as of September 2006 was MNT97 billion (US$83 million).
Although, the Mongolian Stock Exchange used to be the world's smallest stock exchange by market capitalisation in 2006, it has become the world's best performing stock market in 2010. Its market capitalization quadrupled to $2 billion in end of 2011 from 2008 and is speculated that it can get to $45 billion in five years.
Relationship-building and modernization
The Mongolian Stock Exchange have been praised for their approach to customer relationship managementCustomer relationship management
Customer relationship management is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing,...
. To commemorate their 16th anniversary, they organised a sports day, in which broker-dealers and the exchange fielded teams and competed against each other. They were also described as "punching above its weight" in its international knowledge-sharing efforts. It joined the Federation of Euro-Asian Stock Exchanges
Federation of Euro-Asian Stock Exchanges
The Federation of Euro-Asian Stock Exchanges is a non-profit international organization comprising the main stock exchanges in Eastern Europe, the Middle East and Central Asia. It was established on May 16, 1995 with 12 founding members...
in 1998, and in June 2006 formed a partnership with the Korea Exchange
Korea Exchange
Korea Exchange is the sole securities exchange operator in South Korea. It is headquartered in Busan, and has an office for cash markets and market oversight in Seoul.- History :...
. The chief executive officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
of the Mongolian Stock Exchange visited the Korea Stock Exchange in July 2007; officials from the Korea Stock Exchange paid a return visit the following month.
Mongolian Stock Exchange sealed a deal with London Stock Exchange Group to modernize the MSE under an agreement to make it in level of world standard. LSE will manage and provide expertise and someone from LSE might lead the MSE. This comes as there is a mining boom happening in Mongolia and need for robust, private and attractive stock exchange.
Physical location
The Mongolian Stock Exchange is located in the former Children's Cinema building near Sukhbaatar SquareSükhbaatar Square
Sükhbaatar Square is the central square of Ulaanbaatar, Mongolia. It is named after and features a statue of Damdin Sükhbaatar, leader of Mongolia's 1921 revolution...
, next to the headquarters of Mongolia Telecom and across from the Mongolian parliament's buildings. It was refurbished at a cost of US$4.5 million prior to the official start of trading; seats and screens were removed, a trading floor
Trading room
A trading-room gathers traders operating on financial markets.The trading-room is also often called the front office.The terms dealing-room and trading-floor are also used, the latter being inspired from that of a open outcry stock exchange....
was created and equipped with computers, and automatic sinks were installed in the bathrooms. The building itself is a pink-and-white neo-classical-style structure. One corner of the building has been partitioned off to serve as an internet cafe
Internet cafe
An Internet café or cybercafé is a place which provides internet access to the public, usually for a fee. These businesses usually provide snacks and drinks, hence the café in the name...
. Due to the color of its building, the Financial Times
Financial Times
The Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
correspondent, Leslie Hook, defined it the pink house of equities.
Staff
Naidansurengiin Zolzhargal, one of the founders of the Mongolian Stock Exchange, was educated in HungaryHungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
and later studied finance at the Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, and founded the Mongolian Stock Exchange when he was only 27 years old. His young age prompted American magazine Asia, Inc. to dub him "the Boy Wonder of the Mongolian Stock Exchange"; he acknowledged that his rapid career progress "could only happen in a place like Mongolia". His older brother, Naidansurengiin Zhargalsaikhan, was formerly head of the Bank of Mongolia
Bank of Mongolia
The Bank of Mongolia, or Mongolbank, is the central bank of Mongolia. The main objective of the Bank of Mongolia is to ensure stability of the Mongolian tögrög...
, but was ousted from his job after the loss of US$100 million of foreign reserves, which had been invested in futures and foreign currency.
The current chairman, B.Bold, is the CEO of Newcom Corporation and former head of J.P.Morgan's department of Russia and commonwealth nations.