🇲🇳 CHEAPER DOMESTIC FLIGHTS | XACBANK IPO | BANKS' AD SPENDING

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Milestone alert 🚨

Mongolia's GDP per capita reaches $5,000 for the first time.

🤔 DID YOU KNOW?

🏦 XACBANK IPO

XacBank IPO, one of Mongolia's Top 5 banks, is set to begin this week. Here are some key insights.

Must Knows

• Valuation: XacBank aims to raise ₮37.5 billion by offering 5.01% of its shares to the public at ₮677 per unit. As a result, the bank will get valued at ₮712.7 billion after the IPO.

• Allocation: The bank plans to allocate 70% of its IPO shares to strategic investors and the remaining 30% to the general public.

• Subscription Period: May 29-June 5.

What sets apart XacBank?

• High ROE: XacBank 's return on equity (ROE) for the previous year stood at 27.6%, surpassing the average of the Top 5 banks. Furthermore, the bank's total assets have grown by 13.4% over the past year, reaching ₮4 trillion.

• Low NPL: XacBank boasts the lowest percentage of non-performing loans (NPL) among systematically important banks, with NPL standing at 4%.

• Low ownership concentration: No single shareholder owns more than 20% of the bank’s stakes. It’s important to highlight that it will soon become a legal requirement starting next year. XacBank is the only bank that meets this requirement currently, as its parent company, Tenger Financial Group, is owned by 12 unrelated organizations and individuals.

FYI: Rhinos Investment LLC is the lead underwriter and Ulzii & Co Capital LLC is the co-underwriter for the IPO.

📈 DATA STORY: Banks’ Ad Expenses

Mongolia’s banks are spending huge on advertisements over the last few years as they have prepared for IPOs.

🕶️ MUCH CHEAPER DOMESTIC FLIGHTS

MIAT, Mongolia’s state-owned flagship airline, has said it will restart regular domestic flights to destinations such as Choibalsan, Dalanzadgad, Murun, and Khovd from July. The government hopes the move will slash ticket prices to those places by up to 70%, boosting tourism and economic activity.

Hunnu Air and Aero Mongolia are the only two of the country’s 11 airlines that offer regular domestic flights, but the prices are prohibitive. A flight from Ulaanbaatar to Ulgii, the westernmost city home to ethnic Kazakhs, costs ₮1.6 million ($460), comparable to flights to Tokyo and Seoul.

Mongolia’s rural regions have long suffered from a vicious circle of poor connectivity and low economic activity. Aside from flights, they are only reachable by the country’s notorious road network which often breaks down and takes up to 36 hours.

As part of its efforts to boost tourism, the Mongolian government has implemented several initiatives to reform its air transport industry, including liberalization that brought competition to some high-demand destinations and direct flights to the US and the UK.

• After the pandemic, the airline industry has seen a resurgence. Passenger numbers in the first quarter rose 240% year on year to 318,400. MIAT’s domestic flights will surely boost domestic tourism.

• Because ticket prices depend largely on fuel costs, the government has tried to bring down fuel costs through diplomacy and subsidies.

• To help MIAT start domestic flights, the government is giving it one-off financial support to cover initial costs and help it price flights competitively.

It is good to see the long-overdue air transport reforms coming to fruition. Transport has been a key factor in regional inequality domestically and low tourism internationally. But building a sustainable, economically sound industry takes more than government subsidies. It needs to go hand-in-hand with regional development so that people actually take the flights.

🏃 QUICK STORIES

🔵 The construction of a 7.1km railway has started to connect Shivee Khuren-Ceke border which alone exports 48% of Mongolia's coal exports. With the completion of this railway, the export access capacity of the port will be doubled, and cargo transportation can reach 20 million tons.

🔵 The coal trading information on the MSE is now publicly disclosed. In doing so, the weighted average exchange rate of each type of coal will be calculated on the last day of the month. For example, the price of enriched coking coal decreased by 2.5% to ¥1,257.1 last month, which was ¥1,290 in January.

🔵 Crypto market cap increased 18% to ₮384.3 billion as of the first quarter of this year. In addition, there are 12 virtual asset service providers (VASP) registered in Mongolia with an ever-expanding customer base that has surged to 0.83 million individuals. It is worth noting that the average daily trading volume is ₮411 million.

🔵 Securities companies have traded ₮143.9 billion worth of bonds in the primary market so far this year. Golomt Capital, the dominant player in the bond market, played a huge role as they were responsible for 52.6% of it.

⭐ WATCH: Why 99.7% of Mongolia is Completely EMPTY

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Editor: E.Zolbayar
Writer: A.Purevjargal & A.Bilguun

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 consider the information we provide is solely our readers' independent decision.