Mongolia Names Hong Kong Top Fundraising Market for State Firms

By Hanny Wan

April 12 (Bloomberg) -- Mongolia named Hong Kong as its first-choice market for state-owned assets to raise money from the nation's largest trade partner, China.

Major state-owned companies and assets in energy- and infrastructure-related industries are among those that will seek to raise money selling shares in international and local stock exchanges, Mongolian Prime Minister Sukhbaatar Batbold said. He didn't name any companies or give a timeframe for listings.

"We have chosen Hong Kong specially," Batbold said at a forum on listing of Mongolian companies in the city today. "Hong Kong is a natural choice for us as a funding source and source of expertise because it's the best gateway to Mongolia's largest trade destination."

Hong Kong Exchanges & Clearing Ltd., operator of Asia's third-largest bourse, is trying to attract more listings of overseas companies, particularly those with businesses in China and Asia. Funds raised through initial public offerings surged 276 percent to HK$248 billion ($32 billion) in 2009 from a year earlier, the bourse said March 4.

Batbold added that Mongolia also has an "aggressive agenda" to develop its own capital markets and would seek further cooperation with Hong Kong's stock exchange in that area.

The exchange expects five to 10 Russian companies to seek listings in the city in the "next couple of years," Chairman Ronald Arculli said Feb. 18. The first, United Co. Rusal Ltd., debuted in January. In addition to Russian and Mongolian firms, Hong Kong Exchanges also talked last year with potential listing companies in Australia, Japan, Korea, Taiwan, the U.K. and Vietnam, it said.

SouthGobi Listing

The bourse's executives have visited Ulaanbaatar, Mongolia's capital, five times since 2007, Arculli said.

SouthGobi Energy Resources Ltd., the Canada-listed mining company backed by China's sovereign wealth fund, sold shares in Hong Kong for the first time Jan. 29. The stock has declined 2.9 percent from its debut. SouthGobi started production at its open-cast coal mine in southern Mongolia last year to meet Chinese demand.

China's sovereign wealth fund purchased $50 million of stock in the Hong Kong sale, SouthGobi said Jan. 14. China Investment Corp. also bought $500 million of 30-year senior convertible bonds issued by the coal producer last year.

China has been Mongolia's biggest trading partner throughout the past 10 years, according to materials distributed at the forum. China accounted for 73 percent of Mongolia's exports last year, up from 65 percent in 2008, the materials said. Canada came second with 7.8 percent, and the U.K. at 6.7 percent, according to the data.

--Editors: Nick Gentle, Tom Kohn

Source:Bloomberg news service