Source: The Financial Times                          Date: 10 March, 2011

One Hong Kong banker recently said, “Mongolia is the only game in town.” And soon, gung-ho investors may get a new way to play it. The resource-rich country, forecast by one bank to be the world’s fastest-growing emerging market in coming years, wants to raise USD500 million in its first dollar bond sale.

This is not the first time it’s floated the idea. But it’s the first time it has the attention of so many bankers and investors. A minister has said they see the “issuance of inaugural sovereign bonds as a way to set up a benchmark and open up a window for private companies to go and raise money”. The sale would “probably” take place this year, but the idea still sounds tentative and should be treated as such. Last year Mongolia dropped a more ambitious plan for a USD1.2-billion bond sale.

The foundation of Mongolia’s appeal is its vast untapped resources of coal, copper and gold. They help explain why Mongolian equities were the world’s best performing last year, gaining 140 per cent in dollar terms. Mongolia’s surging commodity exports have also raised the value of its currency on the foreign exchanges (1,247 to the dollar as we write) – another appetizing trend for potential foreign bond investors.

Still, any Mongolian bond is likely to sit at the racier end of the fixed-income spectrum. The country is rated B1 by the ratings agency Moody’s, four levels below investment grade and on a par with Fiji and Papua New Guinea.