Until recently, few investors paid any attention to Mongolia. But that’s starting to change. Mongolia is the size of western Europe and is thought to have the world’s second-biggest copper and uranium reserves, while 80% of the country is still unsurveyed, as Dexter Roberts points out in Bloomberg Businessweek.
Its neighbour is China, the world’s biggest commodities consumer. As more and more mining projects are set up, the small economy is rocketing. GDP rose by 9.7% year-on-year in the first quarter. The International Monetary Fund reckons per-capita income could rise fourfold in ten years.
This helps explain why the local stockmarket was the world’s best performer last year, gaining over 170%, while the currency, the tugrik, appreciated by 13% against the dollar.
Now Origo Partners, a London-listed private equity group, is set to launch a Mongolia fund next month, the Mongolian Stock Exchange Liquidity Fund. The minimum subscription is $10,000.
That’s perhaps no surprise, considering the risks, says Ian King in The Times. China is the “only meaningful buyer” of Mongolia’s commodities, while the market is tiny and illiquid, with a total capitalisation of $1.6bn, so it is prone to sharp movements.
It may also be worth remembering that last year’s best-performing markets often become this year’s worst-performing ones.