After series of meetings with Government officials and business leaders in September in UB, we have confirmed that the economic activity in Mongolia is slowing down significantly in the latter half of the year. Also, we have newly forecasted the GDP of 2014 as 6% which is much lower than street consensus. Therefore, we have decided to lower our economic forecast for the latter half of this year to 5%. However, we have also confirmed that the investment climate in Mongolia will not deteriorate further. That is mainly because of the anticipation that more favorable policies should be taken by the Government in a near future .Also, the implied risk premium for major Mongolia related listed companies are too high for politically stable country like Mongolia and valuations are too low. Therefore, we are cautiously increasing risk weight of assets in Mongolia. However, we are not fully convinced of the friendly policies taken by the Government yet as the initiatives taken by the Government are still early stage. Therefore, we wish to see more positive signs before we will be more positive on Mongolia.
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