The Mongolian Stock Exchange was established in January 1991 by the Mongolian government in order to privatize state-owned assets. It is based in Ulaanbaatar. The growth of MSE has been rapid since 2006, at that time it was known as smallest stock exchange because it has US $83 million market capitalization. In 2010 MSE increase 121 percent market capitalization that is why it is known as one of the world’s best performing stock exchange. In the current time MSE has second ranking in terms of best performing stock exchange with 57.8% increase after Venezuela Caracas stock exchange. According to March 2012 MSE has listed 332 companies which have 2.9 trillion market capitalizations (US $2.3 billion), and is voted one of the most progressive exchanges by the best Forex brokers which monitor is closely as it affects largely the currency exchange rates.
The main reason behind establishing the Mongolian stock exchange is to implement the government’s plans for privatization of state owned enterprises in order to ensure the equitable distributions assets. 80% of state assets were privatizes by the stock exchange but, in 1991 resolution number 170 announced that 50% stake were retain by the states but some larger enterprises like, communications, mining, transportation, energy and water supply companies were excluded from the privatization. Voucher based scheme chose by the Mongolian government where MNT 7, 000 worth voucher was issued to every citizen who was born 31 may 1991 in which citizen can purchase shares in large enterprises. While on the other hand Mongolian government also issued red vouchers scheme MNT 3, 000 worth in order to purchase assets in small enterprises. Soon Mongolia has become the world’s highest rate of share ownership where family members were permitted to transfer their shares to each other; people were permitted to redeem their vouchers for shares. At that time 43% population became the stockholders in the Mongolia. In the end, 475 companies which have MNT 17.33 billion worth were privatized by auction also added in the MSE.
On 28 August 1995 secondary trading was begun which were open for international and domestic investors. Out of 475 listed stocks 430 bids were placed and the total turnover was MNT 2.2 million; although market was exposed soon because it has many weaknesses because of newly privatized enterprises. Because of adding new companies in order to gain majority holding many small shareholders sold their shares. The Mongolian stock exchange moved to electronic trading in 1998 while exchanges also begun in order to offer trading related facilities for government bonds in 200. Market capitalization of MSE had expanded as of December 2003 with MNT 52 billion which was 5% of GDP. In November 2002 Mongolian stock exchange became the biggest business because they begun auctioned through the exchange. In 2006 Mongolian stock exchange was known as world’s smallest stock exchange but now the image of the MSE has totally changed. In 2010 it has become world’s best performing stock exchange. As per the data of 2011 MSE was the second best performing stock market.
Physical Location of Mongolian Stock Exchange
It is located near Sukbaatar Square in the former children’s cinema building which is surrounded by Mongolian parliament buildings and headquarter of Mongolian Telecom Company. At a cost of US $4.5 million it has refurbished prior to the official start of trading. Screens and seats were removed from it, trading floor was equipped and created with the computers and in the bathroom automatic sinks were installed.
A New Securities Investment Vehicle in Mongolia
In January 20-2013 the new securities market law came into forces which is why the same year was a very busy for the MSE. The aim of new rules and regulations is to provide best trading and investments platform for the foreign investment in to Mongolia.
Security Market Law
Security market law has taken 5 month to draft with all the necessary rules and regulations. Since January 2013 it also became the major point for attention and discussion. Security market law is framework which introducing financial instruments and those concept which have never been practiced in Mongolia such as, option, warrants and depository receipts, custody, futures, differentiation between nominee and beneficial ownership. 22 regulations have been designed too for the component of law like, clearing, dual listing and other relevant components.
Special attention should be given to dual listing because Mongolian enterprises have new opportunities to be listed in the other stock exchange globally and in MSE as well that might be provide better business liquidity. In MSE foreign companies also have the opportunities to make a secondary listing. The MSE top managers also concerned about the dual listing liquidity level in Mongolia. The security market law will help to increase tradability, liquidity and turnover in the market.