MONGOLIAN FIRMS SEEK US$3 BILLION IN HONG KONG IPOS

Date: 
19 Jul 2010

Asiamoney

Hong Kong listings of Mongolian-focused companies could raise up to US$3 billion within the next three years, according to Eurasia
Capital.

Aaron Pan

Mongolian-focused companies are targeting Hong Kong’s IPO market for up to US$3 billion over the next three years, according to
investment banking boutique Eurasia Capital. SouthGobi Energy Resources, which owns Mongolian resources, created history in
January this year when it became the first foreign company to list shares on the Hong Kong stock exchange. Rivals are now queuing up
to follow suit.

According to Eurasia Capital, at least four other Mongolian-focused resource companies are in talks to conduct initial public offerings
(IPOs) in Hong Kong either by the end of the year or in 2011. “Hong Kong will become the largest market for raising capital for private
and public resources companies with operations in Mongolia,” said Alisher Ali Djumanov, CEO of Eurasia Capital. “Demand for natural
resources in China and geographical proximity, makes resource-rich Mongolia a particularly attractive market for Hong Kong-based
investors.” Hong Kong’s stock exchange particularly appeals to Mongolia-focused companies. The city was the world’s largest IPO
market last year and it has continued to attract share listings this year despite global market volatility. The exchange is also increasingly
becoming a favoured destination for natural resource companies. The market capitalisation of such firms increased more than 30 times
from US$11 billion in 1999 to US$339 billion this year, according to Eurasia Capital estimates. “Although Singapore, South Korean and
Tokyo stock exchanges are also [keen] to see Mongolia-related listings in coming years, they will not be in the same league as the Hong
Kong stock exchange,” Djumanov added. Vancouver-based SouthGobi raised HK$3.4 billion (US$437 billion) in its secondary listing in
Hong Kong earlier this year. The company said its flotation should make it easier for other firms to follow in its wake given that its deal
required a trail-blazing set of waivers to be established by the city’s regulators. “We could have waited until someone else did it first but
we felt there was enough upside to be the first to establish the framework,” Alexander Molyneux, president and chief executive of
SouthGobi, told asiamoney.com in an exclusive interview in March. “We are happy to be the first. Others can take our framework and
copy and paste it into their deals now.” Energy Resources, a coal company with the largest mining license area in Mongolia, Gobi Coal
Energy, which owns the second-largest exploration in Mongolia, Iron Mining International, and Winsway Coking Coal have all either
stated their intentions to list in Hong Kong or already started working on such stock debuts for next year.