Sunday, December 5, 2010

Mongolian Tugrik; best performing currency in 2010

Eurasia Capital:

The Mongolian Tugrik (MNT) has outperformed all the other currencies to date in 2010. The currency of this resource-rich country is continuing its steady appreciation and has already exceeded our projection that the MNT would appreciate +10% to below MNT1,300 per US$ by the end of 2010 ("Mongolia Outlook 2010"), Jan 31, 2010). Supported by accelerated capital inflows, the national currency has appreciated 14.6% y-t-d against US$, reaching MNT1,233.50 per US$ yesterday   (December 2). The MNT broke the 1,300-level, hitting our target for the year twice on August 26 and October 21, forcing the Bank of Mongolia to intervene in the currency market. However after these brief interventions, the MNT continued to appreciate.


The MNT is benefiting from surging investments into the Mongolian economy. The Bank of Mongolia's net international reserves reached US$1.6bn last month. Net foreign exchange inflows increased eight times as of November 2010. Growing foreign investments into the Mongolian economy (primarily into mining), increasing international prices for Mongolian export commodities and inflows of speculative capital are driving the MNT appreciation.
I have talked in the past about how much potential exsists in Mongolia. In fact I have highlighted, in the Actionable Intelligence Alert, a coal mining company that has operations in Mongolia yet trades in Canada. In addition it has gotten easier to open a brokerage account in Mongolia. The London Stock Exchange just won a contract to modernize the Mongolian Stock Exchange. This should eventually lead to increased capital flows as it becomes even easier to deploy capital into the country. The bottom line is that you are getting a possible two fer here. If your Mongolian stocks appreciate and the Mongolian Tugrik appreciates you are getting super charged returns. Here is a link to Harris Kupperman's site where he lays out a well thought out way to play the emerging opporutunity in Mongolia. Full disclosure I own shares in BD Sec.


Anonymous said...

Do those Mongols have their paper pegged at a fixed price to a commodity, gold, silver, whatever, or is it just toilet paper like the rest of the worlds paper?

Mountain rifleman

John Polomny said...

It is like every other currency and is a fiat currency.

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