ULAANBAATAR, April 5 (Reuters) - Mongolia’s Stock Exchange warned it may be cut from the watchlist of candidates for the FTSE Russell frontier markets index unless it meets regulatory standards by August.
The country was first placed on the watchlist in 2012, after its growth hit an all-time high of 17.3 percent. However, a drop in the prices for coal and copper and a slowdown in Chinese growth have since taken their toll on Mongolia’s economy.
“FTSE Russell intends to announce the removal of Mongolia from the FTSE Watchlist, absent tangible progress on removing the main obstacles listed below before the end of August 2017,” the Mongolia Stock Exchange said in a statement on its website on Tuesday.
The International Monetary Fund (IMF) and partners are expected to bail Mongolia out with $5.5 billion in credits.
Private investors’ views on the country, whose untapped resource wealth is estimated to exceed $1 trillion, have soured because of mining disputes and falling commodity prices.
A letter from FTSE Russell, which was quoted in the statement, noted Mongolia’s failure to meet regulatory standards for the Mongolia Stock Exchange (MSE) and a lack of global custodians in the country.
Altai Khangai, the head of the MSE, said on Wednesday he was in London ahead of a meeting on Thursday with FTSE Russell.
“I think the outcome of the meeting will be positive,” Khangai told Reuters.
Investors in Mongolia have also been spooked by disputes with Anglo-Australian miner Rio Tinto over the Oyu Tolgoi copper mine that delayed construction on the $5.3 billion project for underground mining for two years, from 2013 to 2015.
The MSE has also failed to live up to expectations since it was added to the watchlist, with the MSE Top-20 Index falling 37.6 percent since the end of 2013.
“It gives warning to MSE to put its act together before August,” Darambazar Achit-Erdene, chief executive and president of Mongolia International Capital Corporation (MICC), said.
“There have been many changes in the management of MSE, and for past years, FTSE hasn’t been a top priority of MSE management,” Achit-Erdene added. There is still time for the stock exchange to comply with the standards, he said, and bringing in foreign custodians would be good for the market.
Achit-Erdene added that bolstering the MSE could give foreign investors exposure to Mongolia’s largest mining assets.
These include the enormous Tavan Tolgoi coal mine, which the government has long delayed plans to list on the MSE simultaneously with foreign exchanges.
“With commodity prices improving and the launch of an IMF program in Mongolia, its a good time to develop the MSE,” Achit-Erdene said. (Editing by Alexander Smith)