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Capital Markets

Mongolia pays for LSE expertise

Concern that government can’t find $15mln in fees

Six Mongolian commercial banks announced on April 12 that they will form a syndicate to pay the $14.2 million in fees that the London Stock Exchange is demanding for development services for the Mongolian Stock Exchange. But local bankers are worried by the way in which the funding was raised, claiming that they were “encouraged” rather forcefully into participating in the loan by the Mongolian government.

On the surface, the deal is welcome news for both LSE and MSE; it should mean more Mongolian IPO business for London, while Mongolia’s lifeless exchange – locals say orders can take two weeks to fill because liquidity is so low – will get the benefit of the LSE’s management experience and systems.

What concerns bankers in Ulaan Baatar is not the nature of the loan, which is properly structured and above-board, but that in a country with an estimated demand for infrastructure development that runs to the tens of billions of dollars the government couldn’t find just $15 million.

The loan deal, two sources told Euromoney, allows the government to defer paying for the LSE’s services until the next budget.

Where, investors wonder, is the commitment to solving Mongolia’s vast infrastructure needs? The country’s economic charts are all going in the right direction: it claims to be the world’s second-fastest growing economy; the MSE top-20 stock index gained 138% last year, while the currency appreciated 1.9%

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