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Financial Market of

Mongolia:
Current state and
Batpurev A.
Possibilities
Financial Regulatory Commission

Business Summit 2015

Current
state

New
services &
Regulator
Financial
y reform
instrumen
ts

Policy
reform

Securities Market hits bottom

Trading amount/ bln


MNT/

Market cap /MNT bln/

Though, economic growth defines


market value

?
GDP growth
rate

Market cap
growth

Market cap in MNT


mln

Stable growth in insurance


market as penetration improves

0.72%

Variables

2012

Total asset

Total insurance premium

Total compensation

Reserve fund

79.0

93.9

0.70%

180
160
140

0.66%

0.66%

0.64%
0.62%

100

81.3

107.6

126.4

152.5

146.9

80
60
40

0.58%

20

0.56%

2011

2012

2013

Total asset /MNT bln/

Mandatory
insurances

120

0.64%

0.60%

66.1 15,3%

126.4

0.68%

0.62%

57.3

2013

107.6

48.2

0.70%

26.5

YoY
Growt
h
152. 20,6%
5
108. 15,8%
7
31.5 18,9%

201
4

2014

2015.I

Asset in GDP ration

National reinsurance corp.


Private life
insurer
Liberalization
of pension

Rapid growth in micro-finance


continues
700

378

350

600
80.5
500
209
179
139

137

212
177

182
179

132

195
162

212

67.7

159
141

61.9

508.0

381.1

48.8

250

73.8

200

200
100

300

263

400
300

400

51

41.7

44.6

15.6
69.2

35.6
66.4

78.5

96.5

2006

2007

2008

2009

205.4

100

252.1

50

128.6
2010

2011

150

2012

2013

2014

-
Assets of NNBFIs
/MNT
bln/ /./
Asset of S&C Unions /MNT
- /./
bln/
Number
of SCUs
Number of NBFIs
-

Number of NBFIs 32,9%, Number of clients 45%, Total asset 29,3%

Professional entities and


employees
By 2014
Securities market
Professional entities
Employees
Licensed individuals
Micro-finance industry
Entities
Employees
Insurance industry
Entities /including insurer, broker and loss
valuator/
Employees
Insurance agents

73
638
1013
537
2097
67
833
3178

Total number of ~6800 people work in 1118 regulated


organizations.
Number of employees and professional intermediaries increase
20-30 percent every year

Custody and Investment funds


2 custodian banks are licensed and 1s application is in
process

It makes foreign and institutional investors to invest in


Mongolia
- Funds can be mutual and private
-

4 investment management companies are licensed to


establish funds

Government bond as a new


instrument at MSE
3,025.60

2,837.26

179.32

140.00

36.10

2013

Traded at MSE

2014

270.00

2015.Q1

Traded at MongolBank

+ Asset backed Securities of MIK worth ~880


bln/2 trillion can be traded

Public offering of Strategic mining deposit


holders at MSE and more buy opportunities
There are 23 companies that hold exploration or/and operation
licenses of 15 strategic mining deposits;
- 8 are above 51% state owned and could be privatized
through MSE
- 4 out of 8 SOEs are listed at MSE but need to improve
liquidity /Baganuur 25%, Shivee Ovoo 10%, Tavan Tolgoi
49%/
- 2 are traded at foreign exchanges then can issue DR in
Mongolia /TRQ and MMC/
All others also subject to Article 5.6 of Mineral law; A
strategic deposits license holder must trade at least 10
percent of its equities in Mongolian stock market.
+ List of SOEs to be privatized is submitted to parliament
and most of those companies can be traded at MSE at
attractive value.
+ Industrial projects

Regulatory reform
Concept of developer with regulation rather than
supervisor
Business service oriented internal strategy and
organizational structure
Risk based supervision
Projects to support intermediaries with donors
Initiatives to improve market infrastructure;
MIT
CCP
Market data base

Policy reform
New securities law and Investment fund law and following
regulations
Tax incentives in fund industry
Corporate governance program and reform in state owned
companies
Privatization of MSE and Commodity Exchange
Law on Metals exchange
Financial market development program until 2020
proposes supportive legal and tax environment for
securities and insurance business

Financial market development


program 2020
Vision

Mission 2020

A competitive financial system that


supports real economic growth and
inclusiveness

MULTI-PILLAR FINANCIAL SYSTEM FROM


SINGLE-PILLAR /96% BANKING/

Areas of activities

Objectives to be achieved:
- Supporting the real
economic growth through
long-term investment
structure;
- Expanded growth
inclusiveness;
- Converting the long-term
social and economic
projects, such as industrial
and infrastructure, into
financial products so that
private sector participation
will increase;
- Decreased investment cost;
- Establishment of
consolidated financial
supervision structure so that
systematic risk will decrease;

Phases of Development strategy


2017-2018

2015-2016

Pre-conditions
To develop the
financial infrastructure
necessary for financial
market to meet
international
standards;
Improve the legal and
regulatory
environment and
enhance cooperation
of relevant government
organizations;
Strengthen domestic
financial market
participants and
intermediaries;
Capacity building of
regulatory bodies;
To create consolidated
supervision of the
market.

Development phase

Increase market
capitalization and trading
volume of capital
markets;
Increase the types of the
financial market products
and their liquidity and
interconnectedness;
Attract the national and
international investment
institutions and create
sustainable base for
broader ranges of
investors;
Establish transparency;
improve corporate
governance and rights of
investors based on
mutual trust.

2019-2020
Matured market

Raise long-term capital;


Efficient market
infrastructure;
Different types of
investors;
Active financial
intermediaries;
Creating more market
transparency and
improve the mechanism
which will reduce the risk
and join the international
financial market
integration.

THANK YOU FOR ATTENTION!


www.frc.gov.mn
batpurev@frc.mn

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