{"id":28552,"date":"2012-03-26T02:14:46","date_gmt":"2012-03-26T06:14:46","guid":{"rendered":"http:\/\/8.29.132.176\/~kuhio4\/countingpips.com\/fx\/2012\/03\/investing-in-mongolia-is-it-time-to-buy-the-worlds-fastest-growing-economy\/"},"modified":"2012-03-26T02:14:46","modified_gmt":"2012-03-26T06:14:46","slug":"investing-in-mongolia-is-it-time-to-buy-the-worlds-fastest-growing-economy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/26\/investing-in-mongolia-is-it-time-to-buy-the-worlds-fastest-growing-economy\/","title":{"rendered":"Investing in Mongolia: Is It Time to Buy the World\u2019s Fastest Growing Economy?"},"content":{"rendered":"

By MoneyMorning.com.au<\/strong><\/p>\n

It is the world’s fastest growing economy. It also may be the world’s best kept secret.<\/p>\n

Yet it is true. The Mongolia<\/strong> is growing twice as fast as China and it’s a market most investors know little about.<\/p>\n

While Chinese GDP is forecast to grow by 7.5% in 2012, the Mongolian economy<\/strong> is set to grow at a blistering pace of 14.9%.<\/p>\n

<\/span><\/p>\n

That’s down a bit from 2011- but not by much. <\/p>\n

According to official statistics, the Mongolian economy grew 17.3% in 2011.<\/p>\n

Taking the two together, Mongolia would have the world’s fastest growth rate, beating Qatar and Libya over the same two-year time frame.<\/p>\n

So is there a way a regular guy can make money out of all this growth?<\/p>\n

Or to the larger question: Is the Mongolian market where we should be putting our hard-earned savings?<\/p>\n

Investing In Mongolia<\/h3>\n

<\/center><\/p>\n

To start, it’s not all good news when it comes to investing in Mongolia. There is some bad economic news that comes along with the good.<\/p>\n

Mongolian inflation hit 11% in December, and there is fear of it accelerating further. <\/p>\n

More ominously, government spending swelled 56% in 2011, far faster than the economy. After all, 17% growth plus 11% only gives you 28% growth.<\/p>\n

What’s more, government spending accounts for 44% of GDP and is expected to grow a further 32% in 2012. Even the World Bank seems worried – with 17% economic growth it’s hard for even its Keynesian economists to justify runaway state spending as “stimulus.”<\/p>\n

Admittedly, 2011-12 was the run-up to an election – legislative elections are due in June, and the post-Communist Mongolian People’s Party government is trying to buy success in the traditional political way. <\/p>\n

However, Mongolia has a Democratic Party president, and what seems to be a pretty vigorous alternation of parties in power, with elections being close. So while there are the usual good guys and bad guys, the political system seems to be working okay. <\/p>\n

Nevertheless, the public spending figures suggest that even with the rapid growth Mongolia has achieved, major public spending is a problem.<\/p>\n

The Mongolian Economy’s Greatest Strength<\/h3>\n

<\/center><\/p>\n

Mongolia’s big growth driver is its natural resources; the country has large deposits of copper, coal, molybdenum, tin, tungsten<\/a>, and gold<\/a>, which together form about a third of its industrial production. <\/p>\n

Additionally, two giant projects in particular are close to coming on stream. <\/p>\n

The first is the Oyu Tolgoi copper-gold-silver project for which Ivanhoe Mines (NYSE: IVN)<\/strong> is the prime Western partner. The second is the Erdenes Tavan Tolgoi coking coal mine project, which was due to float on London this spring, but has since been postponed.<\/p>\n

One of Mongolia’s big advantages as a natural resource producer<\/a> is that it has a market right next door called China. <\/p>\n

Here’s why that is so important. In this case, it is purely about location. <\/p>\n

At present, prices for these resources are so high that today it’s worth shipping them from the world’s most inaccessible spots to the Chinese markets. <\/p>\n

For example, Brazil’s Vale S.A. (NYSE: VALE)<\/strong> has China as its largest customer, even though bulky iron ore has to be shipped more than halfway round the world to get there. <\/p>\n

However, when resource prices are low, Mongolia will have a huge advantage, and be able to provide just-in-time delivery to Chinese customers, thus being able to maintain its market share when this may otherwise be difficult.<\/p>\n

Mongolia’s direct political risk is thus limited, and its advantage in global resource markets is such that it should remain a major resource producer for decades to come, to the immense benefit of its citizens. <\/p>\n

Breaking Down the Mongolian Markets<\/h3>\n

<\/center><\/p>\n

Yet I am not sure I would put huge amounts of money there.<\/p>\n

The country’s public sector hasn’t seemed to have learned self-restraint, and until it does the chances of the country’s mineral resources being wasted are great.<\/p>\n

Then there’s the lack of attractive opportunities. <\/p>\n

At present, there are no Mongolian companies with ADRs listed, and the delay in the Erdenes Tavan Tolgoi listing suggests there will not be many soon. <\/p>\n

The Mongolian Stock Exchange now has a total capitalization of about $2 billion and over 300 companies listed, but those figures suggest that individual companies are pretty small and the market has had a huge run up in the last few years. <\/p>\n

One can only welcome Mongolia’s rapid growth, and its emergence into the ranks of resource-rich middle-income Westernized countries.<\/p>\n

But the best opportunities there at the moment seem open only to Mongolians.<\/p>\n

Martin Hutchinson
\nGlobal Investing Strategist, Money Morning (USA)<\/strong><\/p>\n

Publisher’s Note:<\/em> This is an edited version of an article that first appeared in Money Morning USA<\/a><\/em>. <\/p>\n

From the Archives…<\/em><\/strong><\/p>\n

A Better Inflation Bet Than Gold?<\/a>
\n2012-03-23 – Kris Sayce <\/p>\n

3D Printing: How “Desktop Factories” Will Create the Next $1 Trillion Industry<\/a>
\n2012-03-22 – Michael Robinson<\/p>\n

How to Invest in the Fastest-Growing Energy Business of the 21st Century<\/a>
\n2012-03-21 – Aaron Tyrrell <\/p>\n

Why You Should Build Your Wealth Using the Biggest BRICS Possible<\/a>
\n2012-03-20 – David Thomas <\/p>\n

Oil Getting Ready For Its Next Rally<\/a>
\n2012-03-19 – Dr. Alex Cowie <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nInvesting in Mongolia: Is It Time to Buy the World\u2019s Fastest Growing Economy? <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au It is the world’s fastest growing economy. It also may be the world’s best kept secret. Yet it is true. The Mongolia is growing twice as fast as China and it’s a market most investors know little about. While Chinese GDP is forecast to grow by 7.5% in 2012, the Mongolian economy is … <\/p>\n

Continue reading “Investing in Mongolia: Is It Time to Buy the World\u2019s Fastest Growing Economy?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28552","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28552","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28552"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28552\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28552"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28552"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28552"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}