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Mongolian Investment Strategy, March 2014

Frontier has revised the model portfolio based on our observations on current economic conditions in Mongolia.

Our beliefs are based on following assumptions: 

  • Based on the increase of the possibility of successful negotiation between OT and Government regarding financing of the underground mine, we are increasing the weighting of
  • copper, especially that of Turquoise Hill
  • However, we are still cautious about the coal sector given the still dull coal business out of Mongolia to China
  • Real Estate sector should be avoided and decrease the weighting further given the relatively stable price and generally the sector should lag the economy when economy will rebound
  • Construction sector should be weaker going forward given the more tighter lending policy by banks in a future
  • Financials should maintain relatively high percentage of 15%. But, some percentage should be allocated out of BDSec to two major banks as the sub-sector is still vulnerable. Also, more percentages have been added to other financials will be newly added to the portfolio
  • Food sector is vulnerable to the movement of the exchange rate. And, it is not easy to shift the cost increase to consumers. So, we have decreased the weighting of APU.
  • Domestic Bonds are totally eliminated from the portfolio because of the low coupon and still strong selling pressure to MNT. Cash (MNT) has been reduced by half because of the
  • weakness of the currency. But, still 10% is allocated because of the higher interest rate.
  • Cash (USD) has been increased to 10% given the opportunities to invest in foreign listed Mongolian securities in a near future.

Download full PDF report from the following link:

 
 
Frontier LLC
Blue Sky Tower Suite 705
Peace Avenue,17
Sukhbaatar District, 1st khoroo
Ulaanbaatar, MONGOLIA

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