💸 3 INVESTMENT IDEAS IN MONGOLIA | INSURANCE INDUSTRY IN 2022

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Get ready to pack away your winter jackets - warmer weather on the horizon!

🤔 DID YOU KNOW?

The U.S. dollar exchange rate exceeded ₮3,500 this month.

2022/02/26: $1=₮2,864
2022/06/26: $1=₮3,129
2022/12/26: $1=₮3,439
2023/01/01: $1=₮3,444
2023/02/26: $1=₮3,517

😕 2022: A DIFFICULT YEAR

The net profit of insurance companies listed on the Mongolian Stock Exchange (MSE) reached ₮3.7 billion last year, which is a 75.7% decrease compared to 2021. To better understand their performance, let's examine other key indicators.

Premiums grow 12%

Last year, the 4 public insurance companies collectively earned ₮151.9 billion in premiums, a 12% increase from the previous year. Mandal Daatgal (MNDL) received the largest share of the total premium income at 45.9%, followed by Bodi Daatgal (BODI) at 21.5%, Mongolian Daatgal (MDIC) at 17.9%, and Ard Daatgal (AIC) at 14.7%. The graph above reveals that premium growth was not uniform across all companies.

Net profit falls 75.7%

Despite the overall growth in premiums, 3 out of 4 companies reported a decrease in net profits.

• Mongol Daatgal: net profit up 45.7% to ₮166.1 million

• Mandal Insurance: net profit down 26.8% to ₮4.1 billion

• Ard Insurance: net profit decreased by 88.9% to ₮758.9 million

• Bodi Insurance: the company incurred a loss of ₮1.4 billion, with their net profit plummeting by 160.9% from the previous year’s ₮2.3 billion

Their average general and administrative expenses surged by 11.4% during the period, which significantly affected their profitability. As a result, all 4 companies have declared that they will not be distributing dividends.

Stocks

The insurance industry saw a considerable decline in profitability last year, with the average valuation of the 4 public companies in this sector falling by 17.5%. Ard Insurance suffered the most significant decline, with a 30.2% drop in valuation. As a result, Ard Insurance's share price fell by 10.4%, while Bodi Insurance and Mandal Insurance saw drops of 2.5% and 8.5%, respectively. Mongol Daatgal, which is less actively traded, remained unchanged.

💸 3 INVESTING IDEAS

Investment opportunities are abundant, but it can be challenging to uncover them in frontier markets like Mongolia. So here are three investment ideas that may pique your interest:

Idea 1: Lithium and rare earth metals

Mongolia has long been recognized for its abundant mining resources, particularly coal, and copper. However, recent exploration efforts have uncovered significant reserves of rare earth metals and lithium, potentially reshaping the country's mining industry. In a recent announcement, South Korea and Mongolia have pledged to "strengthen cooperation in exploring, developing, and trading rare metals in Mongolia to enhance Korea's electronic goods and components supply chain." This partnership is significant given the strategic importance of rare earth metals in various industries.

In addition, ION Energy, a company listed in Toronto, holds the largest and first lithium brine exploration license in Mongolia, and they recently announced impressive results in December. Given Mongolia's strategic location and geopolitical standing, the country is poised to gain a significant advantage in lithium mining. As such, it would be wise to keep an eye out for any upcoming projects related to lithium and rare earth minerals in Mongolia.

Idea 2: Carbon credit projects

ESG investments have gained momentum and are expected to continue growing. One area within ESG investing that is particularly gaining traction is the use of carbon credits, as companies increasingly focus on reducing their carbon footprint.

Carbon credits are financial instruments that allow companies to offset their emissions by buying carbon offsets. So, the challenge now is finding good carbon-offsetting projects which you can build in Mongolia whether it’s wind farms, forest restoration, solar energy, or clean cookstoves projects. These initiatives are only in their early stages in Mongolia, but soon investors will have the opportunity to invest directly in these projects or their carbon credits.

Idea 3: Bank IPOs

Are you bullish on Mongolia's long-term prospects? If so, investing in the country's banking sector may be a sound strategy. The good news is that Mongolia's five systematically important banks are going public, with three of them set to launch IPOs this year, following two that went public last year. These five banks collectively earned almost ₮1 trillion in profits last year, underscoring their pivotal role in the country's economy. As Mongolia's economy continues to expand, these banks are well-positioned to capture further growth opportunities.

Interested in investing but don’t really know much? Don’t worry, we’ve got you covered. In the near future, we'll be organizing webinars with executives from Mongolia's major banks, specifically designed for foreign investors like yourself. During these webinars, you'll have the opportunity to hear the banks' investment pitches and ask any questions you may have. Stay tuned for more information on these events.

Note: If you want to get more detailed information, let us know by replying to this email.

🏃 QUICK STORIES

📌 Mongolia trades with 107 countries in January 2023. Exports increased by 99.7% to $1.1 billion, while imports also grew by 23.6%, reaching $688 million. The total foreign trade turnover increased by $669.5 million, or 61.1%, amounting to $1.1 billion.

📌 Mongolia to celebrate Eagle Festival. The event will be held on March 4-5 near the capital city of Ulaanbaatar to help revive the pandemic-hit tourism. Celebrations will feature competitions between eagle hunters and Kazakh folk music and dance.

📌 Ulaanbaatar to host 23rd Asian Physics Olympiad. The annual physics competition for high school students from Asia and Oceania regions will be held on May 21-29 in Ulaanbaatar under the coordination of the Ministry of Education and Sciences and the Mongolian Physical Society.

📌 Elixir, SB Energy progress Gobi H2 plan in Mongolia. The Gobi H2 project is planned to initially focus on a 10MW electrolyser pilot to produce green hydrogen. Elixir signed a non-binding agreement with SB Energy, aiming to enter a formal deal after a front-end engineering design decision on the pilot later this year.

⭐ TOP NEWS

• Mongolia, UK Celebrate 60th Anniversary of Diplomatic Relations (The Diplomat)

• Mobile culture: A Yale archaeologist sifts through Mongolia’s ancient past (YaleNews)

• Mongolia earns ticket to FIBA Asia Cup 2025 Qualifiers (China.org.cn)

• Elixir, SB Energy progress Gobi H2 plan in Mongolia (Argus)

• MIAT Mongolian Airlines Plans Nonstop Flights To San Francisco (Simple Flying)

• Fitch Affirms Mongolian Mining at 'B'; Outlook Negative (FitchRatings)

• Rio Tinto Group (NYSE:RIO) Q4 2022 Earnings Call Transcript (Yahoo!finance)

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Editor: E.Zolbayar
Writer: Ch.Anuun

Disclaimer: The information "Inside Mongolia" provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to take into account the information we provide is solely our readers' independent decision.