Sunday, February 19, 2017

Government of Mongolia and IMF agree to bailout

Bloomberg:

Mongolia reached an initial agreement with the International Monetary Fund for a three-year program that includes a $440 million loan package as part of a $5.5 billion bailout to help the north Asian country with looming debt repayments.

“The Asian Development Bank, the World Bank and bilateral partners including Japan and Korea are expected to provide up to another $3 billion in budget and project support, while the People’s Bank of China is expected to extend its 15 yuan billion ($2.2 billion) swap line with the Bank of Mongolia for at least another three years,” the IMF said in a statement on Sunday. “The total external financing package will thus be around $5.5 billion.”

This is great news and may lead to a change in investor perception regarding Mongolia. With commodity prices strengthening Mongolia could recover quicker than some perceive.

One item that will help Mongolia is that China banned coal imports from North Korea. This should benefit Mongolia as it is the number 2 supplier of coal to China. This should benefit Mongolia Mining Corp. my coal speculation.

The Mongolian economy is showing signs of bottoming.

The Headline Mongolian Sales Managers’ Index (SMI) was 38.4 in January, an improvement from the level of 37.0 in December. Year-on-year, the January level represents a 6.5 point increase, which could indicate that the Mongolian economy is slowly showing signs of improvement. All sub index components with the exception of staffing levels registered improving levels in January.

 The Sales Growth Index is still in contraction territory but there has been an emerging trend of improving conditions, with the rate of negative growth dropping off slowly. Prices charged for new sales have now started to grow, which suggests higher price inflation is to follow. Managers’ report that the prices increases have had a minimal impact on profit margins, indicating higher input costs are the driving force.


2 comments:

Anonymous said...

Any thoughts on why MMC stock has been trading so weakly while the March 2017 bonds have continued to strengthen? Do you think the market is signaling that creditors, as opposed to equityholders, will extract the upside in MMC's fortunes?

boubin2 said...

Not sure what is going on. However I do know that quite a few member's of the current parliament are big shareholders.

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