Research & Insight

The diaspora of the Korea chapter of the wider publicly listed equity investment world, indexed and otherwise, may have been eagerly hanging on the June 21st announcement from MSCI Barra on global and regional country index component changes – involved and detached chapter observers have been treated to an annual, protracted and stylised will-they won’t-they promotion ritual for several yawning years now… A fully emerged groundhog, or one that is perceptibly emerging… but with a healthily reduced or even removed weighting to telcos in the index. Hark the Korea Herald! It is still emerging! Hold your index and the business page. Now that is news for you… isn’t it?

But the rest of Korea has other significant dates on their minds.

Against the odds, former Prime Minister, Thaksin Shinawatra’s party regained power over the Democrat Party at the July 3rd Thai general elections. The Pheu Thai Party (PTP) won by simple majority, taking 265 out of 500 seats. The PTP is likely to be led by Thaksin’s sister, Yingluck Shinawatra, with Mr Thaksin still living in exile from Thailand.

MSCI Asia ex Japan was flat at 0.01% during the quarter, but this belies a volatile period within where market directions were driven variously by moderating oil and commodity prices, continued concerns about potential China hard landing, European debt crises and increasing evidence of faltering recovery in the US economy while QE2 drew to an end.

After a bright start in April, sentiment deteriorated through May and into June as investors grappled with credit downgrades for Portugal and Greece and weaker economic data from the West. Yet again events from outside the emerging world took centre stage. The fact that the MSCI EM Index fell a mere -1.04% over the second quarter, hides the picture of yet another volatile quarter. Greece dominated the headlines and market attention with a “will-they-won’t they” confidence vote for the prime minister followed by a crucial vote to ratify a $40bn austerity package. The passage of the latter helped global equity markets rally into the last week of the quarter. Also helping markets at the end of June was the surprise release of oil inventory (supposedly to make up for lost production from Libya) by the International Energy Agency. The resulting dip in the oil price is seen as some relief to the weak growth in developed economies.

Mongolia has a population of 2.7m people. About 30% of the population still live a nomadic life style, rearing 40m animals. 50% of the people live in the capital Ulaanbaatar (UB). The country has vast natural resources including rich deposit of coal, copper, gold, iron, uranium and other base metals. After the fall of the Soviet Union which provided 90% of the country’s financial support, Mongolia went through a period of economic hardship as the Soviet financial aids stopped. Neglected by the world for almost 20 years after the fall of the Iron Curtain, Mongolia is now back in the world spot light thanks to its rich natural resources that have attracted significant attention and foreign direct investment. South Gobi Resources (based in Ovoot Tolgoi, some 50km from the Chinese border) and Mongolia Mining Corporation (in Tavern Tolgoi, 250 km north of the Chinese border – a prolific coal resources area, where Mongolia Mining only has a small piece of the vast reserves) are already producing coals. Both companies are listed on the Hong Kong Stock Exchange.