3 Sectors To Buy In Mongolia If IMF Funding Succeeds In Boosting Diversification Beyond Mining 1

IMF funding to focus on 3 areas in Mongolia

The IMF has approved a three-year, $434 million loan for Mongolia as part of a broader $5.5 billion financing package. The bailout program focuses on:

  • Fiscal consolidation, which may require Mongolia to tighten monetary and fiscal policy
  • Recapitalization of financial institutions (read, Mongolia’s Banks Threaten Economic Crash)
  • Boosting the economy’s competitiveness and fostering diversification to create jobs and achieve more inclusive growth.

Currently, over 86% of Mongolian exports fall under minerals and metals (XME). While commodities do remain a backbone of the economy, the IMF sees Mongolia as also well positioned to develop its meat and dairy exports, as well as its already well-known cashmere sector.

Opportunity to diversify beyond mining

While Rio Tinto (RIO), Turquoise Hill (TRQ), Erdene Resource Development (ERDCF), and Xanadu Mines (XANAF) continue to generate revenues from their mining sector investments, consumer based companies may soon have a chance to account for a larger share of this Asian (AAXJ) (VPL) nation’s exports. With close to 60 million livestock and the IMF’s financial support, meat exporters such as Makhimpex JSC (MSE: MMX), Makh Market LLC, Mongol Eco Makh LLC, Green Grace Land LLC, Darkhan Meat Food LLC (HSH), and Khaan Khuns LLC, Aussie Meat Company, Erdmeat LLC, and Precom LLC may see brighter days ahead. China, Russia, and Vietnam currently count among the three biggest markets (in order) for Mongolian meat exports.

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Within the dairy space, Suu JSC (MSE: SUU) also holds potential. The dairy processor, Mongolia’s first, is also a recipient of international funding from the IFC which is a part of the World Bank Group.

Mongolia is the second largest producer of cashmere after China (FXI), providing nearly 28% of the total global supply. From Mongolia’s cashmere sector, Gobi JSC (MSE: GOV) owns over 21%of the world’s cashmere processing capacity. 25.1% of the company trades on the Mongolian Stock Exchange. Tuul Cashmere (MSE: TUL), Buyan (BYN), Sun Shiro, are other notable cashmere producing corporations in Mongolia.

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