How to play Mongolia's massive mineral wealth

Investing in Mongolia's massive mineral wealth is an exciting, if somewhat risky, investment opportunity. Luckily, there is a brand new, London-listed fund to help you take advantage.

I have had excellent intentions of writing something about Mongolia for you ever since I interviewed Chris Rynning of Origo Partners Plca few weeks ago. However, I put it off and now I see that Dominic Frisby has beaten me to it in yesterday's Money Morning: Feeling adventurous? Here's the next great land of opportunity.

Dominic sums up the case pretty well, but the problem for me with Mongolia is China. Its future prosperity appears to be leveraged almost completely to Chinese demand for its astonishingly abundant natural resources. 98% of Mongolian exports go to China.

So what happens if China and Chinese demand crashes? Chris who has worked in China for decades doesn't think it will. But even if our bearish case does play out, he isn't convinced that it will affect Mongolia particularly badly. It is, he says, "always easier" to transport the likes of coal across one land border than over many oceans. That gives Mongolia a massive advantage over Australia, New Zealand and Brazil.

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If demand for commodities as a whole falls, it is entirely possible that demand for commodities from Mongolia will still rise. Right now, Mongolia is only just starting out down its exporting path (it is still a net importer) but as it becomes a net exporter (from next year), says Chris, it will find itself with a trade surplus and then, as is usually the way, with a rising currency. That'll be good for those who invest now.

Investing, as Dominic points out in his piece, isn't easy. Even Chris quite the fan of Mongolia notes that valuations are "all over the place" and liquidity is "hopeless". However, he also thinks that will change as Mongolia's partnership with the LSE gets underwayand as its large resource groups start to list.

This is risky stuff, but if it interests you, Origo have set up a Mongolia fund which you can find out more about here(minimum investment $10,000). It is interesting for the equity exposure but also for the cash exposure: interest rates in Mongolia are around 14-15% which even if you take its high inflation into account still means that depositors are making a real return of 5-6%. That's not something you can say of many other countries.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.