Noble Group raises stake in Mongolian railways firm in exchange for debt repayment www.businesstimes.com.sg

NOBLE Group has bought an additional 10 per cent stake in Northern Mongolian Railways Limited (NMRL), a subsidiary of Australia-listed Aspire Mining Limited for US$1.4 million.

Foreign exchange reserves reach USD 2.9 billion www.montsame.mn

Ulaanbaatar /MONTSAME/ This year, the Central Bank’s foreign exchange reserves have surged to USD 2.9 billion. The reserves are crucial factor to sustain value of domestic currency and stability of financial and macro economic sector.

December 28, 2017 trading report www.mse.mn

On December 28, 2017, 732,831 shares of 34 firms listed as Tier I, II, and III were traded. 20 companies’ shares increased in price while those of 11 companies decreased and 3 companies unchanged. Mik Holding /MIK +14.96%/ and Khunnu Management /HBZ +14.96%/ were the top performers whereas Juulchin Gobi JSC /JGV/ was the worst performer, decreasing 15.00 percent.

Renewables generated triple the power of coal in 2017, UK figures show www.theguardian.com

British wind farms generated more electricity than coal plants on more than 75% of days this year, an analysis of energy figures has shown.

Mongolian livestock count reaches 66.2 million www.news.mn

The results of the livestock census that was carried out between from December 7th to 17th have been published. According to the results, the total number of livestock reached 66.2 million heads of livestock at the end of 2017, which is an increase of approximately 7.8% from 2016.

Mongolia debt dive caps Central Asia comeback www.atimes.com

Mongolia was lauded this month for more “durable than anticipated” 3% GDP growth in 2017 in the International Monetary Fund’s first review of its US$400 million rescue program, following an $800 million five-year external bond return in October, where the 5.5% yield was half the previous peak.

Since the May rescue by the IMF, commodity exports have picked up, particularly to China, with mine closures in that country and its ban on imports of North Korean coal, and boosted budget revenue in local-currency terms with the weaker exchange rate against the US dollar. “Investor confidence recovery” with the successful international issuance will boost the balance of payments and reserves, and fully cover 2018 maturities and refinance more expensive domestic debt, according to the evaluation.

However, both the IMF and frontier-market fund managers continue to be wary as political and banking-sector complications in Mongolia dilute the upbeat narrative. The new government elected in July lost a confidence vote, ousting the prime minister, who was then replaced by his deputy, while the IMF’s health check was delayed.

Bank credit growth is still at a runaway 20% annual pace, with large foreign-exchange exposure and a 7.5% bad-loan rate pending the results of an overall asset quality audit by the central bank. Despite headline economic strides, on structural reform the IMF report assigned a “mixed” score, as regional peers Azerbaijan and Kazakhstan not under the lender’s thumb likewise have rebounded from crisis but remain ambivalent near-term bond bets.

The jumps in prices for Mongolia’s coal, copper and gold from Chinese demand stoked 5% first-half growth in gross domestic product, but construction has been negative for four years, with excess real-estate inventory. The windfall produced a budget surplus through September, but scheduled social and civil-servant handouts will result in a deficit, as the 2018 blueprint adopted by parliament could send the overall gap close to 10% of GDP, according to President Khaltmaa Battulga, who vetoed it as against the IMF arrangement.

Growth is slated at 4.2% amid introduction of a progressive income tax, but the president lambasted “inefficient investment projects” pushed by the ruling Mongolian People’s Party, which holds 65 of the 75 seats. Battulga belongs to the opposition Democratic Party.

A fiscal-stability law envisages end-decade balance, but the IMF warns that the government wage bill compromises the target and threatens medium-term sustainability, with public debt already at 85% of output.

Inflation was over 8% in October, and monetary policy has reversed course toward easing with a 100-basis-point drop in the benchmark interest rate to 11%. The IMF urged the central bank to go slowly on cuts as the recent reserve buildup to $2.5 billion on a stable tugrik may not last. The Bank of Mongolia has regularly dipped into the stash for intervention, even though its currency powers are murky and shared with the Finance Ministry.

An updated organic law is to clarify the central bank’s independence and regulatory authority more broadly, but in the meantime its hands are full with the asset-quality exercise conducted with accounting firm PricewaterhouseCoopers. It will screen bank business plans and apply stress tests, with capital holes to be remedied by the end of next year when deposit insurance is due to start.

Among outstanding challenges, the financial sector agenda is “most important” and funding decisions should not tilt to favored shareholders or jeopardize the public-sector balance sheet, the IMF evaluation concluded.

Azerbaijan came in for separate caution under a December Article IV survey by the IMF, with stagflation ending as the hydrocarbon and service industries revive, but with banking-sector restructuring “still incomplete.”

Inflation will be near 15% in 2017 after exchange-rate depreciation, and increased fiscal spending should be reined in by clear rules before 2019, it recommended.

Privatization has drawn foreign-investor interest in real estate, and external debt remains minimal at under 20% of GDP.

Fitch Ratings expects positive growth in 2018 muddied by “continued bank asset quality pressure” despite the bad-loan cleanup at the International Bank of Azerbaijan. The rater was also skeptical about the Halyk-Kazkommertsbank consolidation as the biggest government-owned lender in Kazakhstan following the initial stage of operations merger in December.

Foreign-exchange positions may deteriorate as local-depositor tenge sentiment continues to swing as measured by dollarization levels, and international bonds were shaken by a New York court ruling freezing central-bank reserves in an investor dispute while the overall system is in knots.

Five Oil Signals to Watch in 2018 www.bloomberg.com

OPEC and its allies are heading into the second year of supply cuts to wipe out the global oil glut, while rising U.S. output is threatening those efforts. Geopolitical tensions also add a wild card to the market mix.

As oil watchers seek to plot a course through the year ahead, they’ll be paying close attention to signals ranging from timespreads to options contracts. Here are five key barometers to watch as 2018 unfolds:

1. The Shale Signal

WTI’s discount to Brent closed at its widest level in more than two years on Tuesday as an explosion at an oil pipeline in Libya boosted the global benchmark. That came after Hurricane Harvey kept supplies locked in the U.S. earlier in the year, providing the first trigger for a wider spread and bumper U.S. exports. With shale growth driving forecasts of record U.S. supply in 2018, that could lead to a further expansion in the spread. “If we get more shale and Canadian crude in the first half, and OPEC cuts hold, then it should widen,” said Richard Fullarton, founder of London-based commodity hedge fund Matilda Capital Management Ltd.

2. OPEC’s Bellwether

Brent crude surged into a bullish, backwardated structure this year as OPEC-led output cuts tightened global supplies. December 2018 futures climbed to their highest premium ever versus the same month for 2019 this week, and the spread may expand further as OPEC’s cuts drive the oil market toward balance next year, according to Abhishek Deshpande, head of oil research at JPMorgan Chase & Co. “We are more comfortable with a balanced market to take a view of going long that spread,” said Deshpande.

3. Lottery Tickets

With geopolitical risks flaring in a host of major oil producers, funds have been busy snapping up bullish oil options contracts that would profit from a sharp spike in crude prices. The December 2018 $100 call remains the most-held Brent options contract, while $80 calls equating to more than 30 million barrels for the latter part of next year traded in recent weeks. Venezuela, Iran and Saudi Arabia top the list of countries that could see oil-related disruptions in 2018, RBC Capital Markets LLC analysts including Helima Croft wrote earlier this month.

4. Volatility Vacuum

Despite those risks, volatility has plunged to the lowest in more than three years in recent weeks as a steady grind higher in prices took some of the fizz out of the oil market. With the Organization of Petroleum Exporting Countries clearly signposting its plans for 2018, banks including Societe Generale SA expect to see a continued slide in volatility next year. “OPEC’s decision to proactively manage the market is going to keep volatility flat as a pancake,” Amrita Sen, chief oil market analyst at Energy Aspects Ltd., wrote earlier this month.

5. How Long?

The market is heading into 2018 near a record number of bullish bets in Brent and WTI combined, exchange data show. Those contracts, which now outstrip bearish ones by seven to one, have led to concerns that crude may soon see a speculator-driven slump. That bullish positioning has been “the largest bearish cross in my scorecards for the last several weeks,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA. What’s difficult is that “we don’t know the type of players. If they want to have a larger part of their assets in commodities for the next couple of years, then they’re not going to sell those positions.”

Revenue of MIAT increases by 22% www.news.mn

In 2017, MIAT – Mongolia’s National Airline – has flown 16,200 hours of air travel, carrying 592,000 passengers on 2,003 flights on one local and nine international routes. Compared to the 2016 figures, the number of passengers carried has gone up by 20% and operating income has seen an increase of 22%.

First Group of North Korean Workers Leaves Mongolia Amid Sanctions www.rfa.org

The first group of North Korean workers earning foreign currency for the Kim Jong Un regime in Mongolia has returned home following sanctions brought in response to Pyongyang’s most recent nuclear test, according to sources, who said most of the remaining laborers will have left by early 2018.

North Korea conducted its sixth nuclear test on Sept. 3 and claimed to have detonated a hydrogen bomb. Later that month, the United Nations’ Security Council adopted resolutions prohibiting any country from accepting North Korean workers in response to the test, and on Dec. 22 passed an additional resolution requiring North Korean workers abroad to return home within two years.

A source in Mongolia told RFA’s Korean Service Wednesday that Mongolian authorities had stopped issuing one-year visa renewals for North Korean workers, who mainly earn foreign currency in construction in the country, and said that a group of them had recently left on a train from the capital Ulaanbaatar.

“North Korean workers got on a Beijing-bound train in Ulaanbaatar not so long ago,” he said, referring to the capital of neighboring China, where the workers will transfer and continue their journey home by rail.

“It seems like the rest of the workers will be pulled out by early next year.”

It was not immediately clear how many North Korean workers had left in the group.

The source, who is familiar with foreign investment in Mongolia and spoke to RFA on condition of anonymity, said that Mongolian authorities had asked the North Korean workers to leave to ensure that Ulaanbaatar was in compliance with the U.N.

“Due to the U.N. resolution, Mongolian construction companies are not able to sign new contracts with North Korean workers,” he said.

“Mongolia is in need of large-scale foreign investment, and it wouldn’t be easy to bring in investors if there are North Korean workers in the country.”

‘Faithful and skillful’

Firms in Mongolia began hiring large numbers of workers from North Korea in 2008 amid a construction boom, and Ulaanbaatar and Pyongyang reached an agreement to send as many as 5,300 North Koreans there over the next five years.

But the number of North Koreans in Mongolia has dropped annually since a high of more than 2,100 in 2013, when the country began dealing with an economic crisis. As of November 2017, nearly 1,200 North Koreans were employed in Mongolia.

Construction firms prefer to hire North Koreans because they work long hours for little money, a source in Mongolia’s construction industry told RFA.

Their North Korean handlers also routinely forbid them from leaving the construction sites, where they sleep and eat, enduring poor living conditions.

“North Korea workers were popular at construction sites because they were faithful and skillful,” said the source, who also asked to remain unnamed.

“[The workers] were hoping they might be allowed to stay in Mongolia up until the last minute before they left.”

According to a U.N. estimate from September, around 100,000 North Koreans working abroad send some U.S. $500 million in earnings to Pyongyang annually.

Most of the workers are stationed in Russia and China, where they regularly work more than 12 hours per day for wages they see as little as 10 percent of, after the Kim regime takes its cut.

Other North Koreans in Mongolia find work in cashmere factories and as acupuncturists or practitioners of Korean traditional medicine.

Research report released on the "Possibility of listing domestic commercial banks on the stock exchange" www.mse.mn

The Financial Stability Council held its regular meeting on 25 December 2017 at the Financial Regulatory Commission (FRC) and discussed the “Overview of Non-bank Financial Sector” and the research report on “Possibility of Listing Domestic Commercial Banks on the Stock Exchange” conducted by an independent research group.