About 100 Mongolians spent USD7 million to buy MMC shares at Hong Kong IPO

After Energy Resources or Mongolian Mining Corporation (MMC) successfully traded its shares at an international stock exchange, questions have resurfaced if ordinary Mongolians can ever hold shares in companies that work here. D.Achit-Erdene, President of the Mongolian International Capital Corporation (MICC), answers our journalist’s questions on the issue.

What did Mongolians have to do to buy shares in the IPO?

They had to submit a copy of their passport and citizen ID card to MICC, along with details of their bid.

We initially wanted a minimum of USD10,000 to open an individual account but later reduced it to USD5,000. We help people to sell and buy not only at the Hong Kong Exchange but at other exchanges in the world also. The holder can monitor his account on the Internet and can also issue instructions online.

How much of the shares were bought by individuals and non-financial institutions?
An IPO at a large international exchange has to observe very detailed rules. For example, 90% of the shares MMC offered were reserved for large investors or funds, leaving only 10% for small investors. We were happy that 1% was kept for Mongolian citizens. We were surprised by the strength of the demand. The 1% meant USD7 million, which is quite a large figure, but we received enough orders to stop booking after two days. We then submitted fresh applications to the secondary market.

What is the difference between buying at the primary market and at the secondary market?
Prices are fixed at the primary market. This was HKD7.02 per share. This would change in the secondary marker according to demand. The demand continued to be so strong in Hong Kong that prices kept rising, and were 20% more after five days. At close of trading on October 19 the rate was HKD9.60. This fell to about HKD9 on October 20.

Anybody who wants to buy shares can do so through MICC?
Certainly. They can come in person to open an account or apply through website http://www.micc.mn/. We trade in all shares at any exchange of the world. So many Mongolians were interested in the MMC IPO because they knew of the company and trusted its management, not because the shares were sold at Hong Kong.

Is there a limit on the number of shares one can buy?
Shares were sold in blocks of 500. Anybody opening an account with us with a minimum of USD5,000 could ask to buy not only MMC shares, but those of any other company listed at the exchange. These include Google and Citi Bank shares.

Are there other Mongolian companies considering an IPO at the international market?
Kharanga Iron LLC will have an IPO in Australia in December. Two other companies are also making preparations and we have placed advance booking. We also traded in Khunnu Coal stock when it had an IPO in Australia last February.
MMIC acts not only as a broker but also offers help in raising capital to companies active in Mongolia. We publish the MICC Mining Index. Our representatives meet with company officials and offer results of our studies.

Apart from MMIC, which other brokerage firms dealt with MMC shares?
We had been allotted special rights at the primary market but there was an Australian company and others in the secondary market.

Could organizations and companies buy shares?
Yes, they can, just like individuals, but there is more paper work involved.

How many Mongolian citizens bought MMC shares?
I cannot give you the exact number as such records were not kept. My rough guess would be about 100. We would of course like the number to be more.

What percentage of its shares did MMC sell at the IPO?
It sold 719 million of its 3.6 billion shares, which is about 20%. The prospectus document has all the details and can be seen at the website www.mmc.mn.

Who are now the major shareholders in MMC? There is rumor the Chinese have bought most shares?
The Hong Kong Exchange is big but the London and New York exchanges are the centers for mining companies. Generally, shares at the HKE would be bought by American and England investment funds. The HKE is stronger in retail trade. This was seen at the MMC IPO too. I would guess 50% of the shares offered were cornered by West Europeans, while US and British investors specialized in mining were also active, because JP Morgan and Citi Bank managed the IPO
source: www.news.mn


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