Enhancing opportunities to increase investor participation in the Mongolian Stock Exchange

Abstract

Mongolian capital market is comparatively young with 28 years of history. However, the market is showing constant improvements, its pace is slow. There are many barriers to the Mongolian capital market development, such as securities trade volume and frequency are minor, investors are not active, lack of professional investors and the main public have poor financial knowledge.

Mongolian capital market is tightly and positively correlated with the national economy. The reason is mining companies have huge market capitalization and the majority of Mongolian export is mining products. Mongolian economy is recovering the last few years step by step. 2017 was the big year for the Mongolian capital market. Total market capitalization reached MNT 24.4 trillion and then increasing continuously.

However individuals participation is low, Mongolian capital market is becoming attractive to the domestic investors, but due to lack of regulatory environment enforcement, foreign investors are not interested. Financial literacy improvement might enhance investor participation in the MSE.

Corporate governance and the company's transparency is another big issue. Currently, only about 5 percent of the listed companies can be classified as transparent. Corporate transparency and stock trade frequency are positively related. To improve transparency in the MSE, the FRC needs to push listed companies more.

To accelerate the speed of Mongolian capital market development and to enhance investor participation new comprehensive strategy, new technology and new product are needed.