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FUNDAMENTALLY AND DESPITE LATEST NEGATIVE DEVELOPMENTS, MONGOLIA IS STILL "NEGATIVELY" CORRELATED TO GLOBAL FINANCIAL MARKETS AND RISK AVERSION RISING

FUNDAMENTALLY AND DESPITE LATEST NEGATIVE DEVELOPMENTS, MONGOLIA IS STILL "NEGATIVELY" CORRELATED TO GLOBAL FINANCIAL MARKETS AND RISK AVERSION RISING

Below we highlight the performance of the Mongolian equity market indice vs. the world year to date. As shown, in spite of global macro-weakening MSE is still the best performing market in the world and economy has grown 17% in 2Q2011 in correlation with our view that, fundamentally, Mongolian is “negatively” correlated to global markets and risk aversion rising.
That being said, Mongolian economy does rely heavily on commodity price especially, at the moment , for coal, copper and iron ore. The sharp selloff of copper and slowdown in China are worrisome signs for Mongolia although Mongolia has some protection as increased volume and lower costs for example for coal. In addition, latest politicians' nationalistic statement over OT IA are casting shadow as demands over size of share of the pie are likely to result in the whole size of the pie to shrink. All in all, the political risk premium of Mongolia has risen back again and will remain so until the next election. In addition, weaker fundamentals will drag the market here. In accordance, we are advise cautiously optimistic stance to investors. We expect Mongolian assets to rebound strongly after the election in June 2012, when politicians will not have to play in such manner any more.
Mongolian Stock Market Performance today and Year to Date vs. World

Stock Market Yesterday’s close 1D%chg YTD

Stock Index

DJIA

10,771.48

0.35

-7.71

NASDAQ

2,483.23

1.12

-7.74

FTSE 100

5,066.81

0.50

-14.12

DAX

5,196.56

0.63

-25.65

Nikkei 225

8,435.99

-1.45

-17.53

S&P/ASX 200

3,927.30

0.62

-17.24

Hang Seng

17,668.83

-1.36

-24.61

Hang Seng China Ent

9,033.09

-1.84

-29.89

Shanghai

2,433.16

-0.41

-13.35

Top20-MSE

19,632.00

-0.34

33.01

CHIEF INVESTMENT STRATEGIST

Dale Choi

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As always, we welcome your any inquiries for more information, any feedback, suggestions or comments that you would like share with us, please drop me a line at This email address is being protected from spambots. You need JavaScript enabled to view it.!

Frontier Securities
Ulaanbaatar, MONGOLIA

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(T) 976-7011-9999
(F) 976-7011-1991