Khan Investment Management Update (24/07/2012)
Mongolia has a new government (Mogi: well, not exactly, just elected the speaker yesterday on Tuesday, the very first order in the path to forming a government), the Mongolian Stock Exchange (MSE) is now trading on the Millennium IT System (introduced by the London Stock Exchange), Naadam festivities are over, and the country is now poised for intensified growth as Oyu Tolgoi approaches production and other mining and infrastructure projects come on line. In our view, there has never been a better time to gain a diversified exposure to the Mongolian growth story.
June was a challenging month for the Khan Mongolia Equity Fund (KMEF) with performance suffering from continued short-term price volatility exacerbated by political stability concerns in the lead up to Mongolia's general elections held on June 28th and global anxieties about Chinese growth, resulting in a selloff of Mongolian mining companies listed on international exchanges, particularly those in the coal sector. We believe that Mongolian resource and mining stocks have been grossly oversold – largely in line with global equities and the resource sector in particular – without consideration to individual company analysis or even the most conservative estimations of valuation.
Of the 19 securities held within the portfolio as at end of June, only 3 recorded positive gains for the month. The worst performer was Xanadu Mines (XAM:AU) which shed 26.00%. Xanadu remains a core position within the portfolio and one of our top stock picks, which we continue to acquire on price weakness. Erdene Resource Development (ERD:CN) lost 20.00% and Mongolian Mining Corporation (975:HK), Mongolia's largest coal exporter, fell 16.79%.
The Khan Mongolia Equity Fund performance for June was -10.33%.
The Net Asset Value as at 30 June 2012 was USD 67.17
The June Factsheet can be downloaded by registered users of the Khan Investment Management website – www.Khan-Management.com
In June, Mongolia successfully completed its 7th free and fair national parliamentary elections. The business friendly Democratic Party (DP) will lead a new coalition government 75%/25% in partnership with the nationalist "Justice Coalition" (JC) which is led by the Mongolian People's Revolutionary Party (MPRP), headed by former President Enkhbayar, who is now on bail awaiting trial at the end of this month on allegations of corruption. Mr N. Altankhuyag, head of the DP, will become Mongolia's new Prime Minister. We expect the DP, with 75% control of the coalition, to enforce their pro-business agenda upon the junior members of the coalition, welcoming foreign investment, driving positive policy and encouraging growth over the next 4 year term.
The new DP led government will sit for the first time this week and we are confident that they will be quick to hasten growth and development, including the slated privatization of promising state-owned enterprises, encouraging growth in non-mining industries, and maintaining double digit economic growth targets.
We reiterate that China is not broken, that absolute growth still remains strong, and that even in the advent of a Chinese "slow down", Chinese consumption of Mongolian resources will continue to increase at considerable multiples as access to the country's comparatively cheap commodities improves via new infrastructure developments.
The Mongolian Stock Exchange (MSE) has now officially adopted and is operating the Millennium IT Trading system provided by the London Stock Exchange, allowing for T + 3 settlements. This significant development in conjunction with additional regulatory reform will assist further in attracting capital to the nascent bourse.
In early June, Temasek, Singapore's sovereign wealth fund, purchased 5% of Ivanhoe Mines (IVN:US) and the world's richest woman, Gina Rinehart, is also believed to be acquiring significant Mongolian mining assets through her company Hancock Prospecting. Turkish Airlines recently announced services from Istanbul to Ulaanbaatar, and MIAT Mongolian Airlines has increased the number of direct flights from HK.
In our view, there has never been a better time to gain exposure to the Mongolian growth story. After almost 700 years of occupation and oppression, and after only just over two decades of democracy, the country is finally on the precipice of financial independence, however for the time being remains heavily dependent on foreign investment. Mongolia is experiencing phenomenal GDP growth – currently the fastest in the world – growth not seen in Mongolia since the last of the great Khans.
Within the next couple of years the country will have the potential capacity to effect global coal prices and will be one of the largest copper exporters in the world. With a massive resource endowment literally on the doorstep of the world's largest and growing commodity consumer, poor infrastructure, a small population, and masses of required development needed in order to extract the country's mineral riches there are ample investment opportunities.
We foresee many attractive IPOs in the coming months, a number of positions we are invested in remain at very attractive entry points, and the long-term growth story and prospects for capital appreciation remain inherently strong.
I will be traveling to Melbourne from 26th July to 3rd August, Singapore from 5th to the 14th August and Hong Kong from 15th to 17th August to meet with our investors and prospects.
I will then travel to Mongolia from the 19th August to 7th September where in conjunction with my colleagues we will be visiting a number of Chinese border crossings, surveying a number of exploration, developing and operating mines, undertaking company visits in Ulaanbaatar, participating in the Discover Mongolia 2012 conference and finally, I will be speaking at Frontier Securities' Invest Mongolia 2012 conference. For investors interested to visit Mongolia, we recommend that the last week of August and first week of September is a great time to gain an intensive insight into Mongolian opportunities, participate in a number of exciting conferences, and meet with officials, regulators and companies.
I thank our investors for their continued support and I look forward to updating you further of our developments next month.
Best regards,
Travis Hamilton
Managing Director KHAN INVESTMENT MANAGEMENT LIMITED
June was a challenging month for the Khan Mongolia Equity Fund (KMEF) with performance suffering from continued short-term price volatility exacerbated by political stability concerns in the lead up to Mongolia's general elections held on June 28th and global anxieties about Chinese growth, resulting in a selloff of Mongolian mining companies listed on international exchanges, particularly those in the coal sector. We believe that Mongolian resource and mining stocks have been grossly oversold – largely in line with global equities and the resource sector in particular – without consideration to individual company analysis or even the most conservative estimations of valuation.
Of the 19 securities held within the portfolio as at end of June, only 3 recorded positive gains for the month. The worst performer was Xanadu Mines (XAM:AU) which shed 26.00%. Xanadu remains a core position within the portfolio and one of our top stock picks, which we continue to acquire on price weakness. Erdene Resource Development (ERD:CN) lost 20.00% and Mongolian Mining Corporation (975:HK), Mongolia's largest coal exporter, fell 16.79%.
The Khan Mongolia Equity Fund performance for June was -10.33%.
The Net Asset Value as at 30 June 2012 was USD 67.17
The June Factsheet can be downloaded by registered users of the Khan Investment Management website – www.Khan-Management.com
In June, Mongolia successfully completed its 7th free and fair national parliamentary elections. The business friendly Democratic Party (DP) will lead a new coalition government 75%/25% in partnership with the nationalist "Justice Coalition" (JC) which is led by the Mongolian People's Revolutionary Party (MPRP), headed by former President Enkhbayar, who is now on bail awaiting trial at the end of this month on allegations of corruption. Mr N. Altankhuyag, head of the DP, will become Mongolia's new Prime Minister. We expect the DP, with 75% control of the coalition, to enforce their pro-business agenda upon the junior members of the coalition, welcoming foreign investment, driving positive policy and encouraging growth over the next 4 year term.
The new DP led government will sit for the first time this week and we are confident that they will be quick to hasten growth and development, including the slated privatization of promising state-owned enterprises, encouraging growth in non-mining industries, and maintaining double digit economic growth targets.
We reiterate that China is not broken, that absolute growth still remains strong, and that even in the advent of a Chinese "slow down", Chinese consumption of Mongolian resources will continue to increase at considerable multiples as access to the country's comparatively cheap commodities improves via new infrastructure developments.
The Mongolian Stock Exchange (MSE) has now officially adopted and is operating the Millennium IT Trading system provided by the London Stock Exchange, allowing for T + 3 settlements. This significant development in conjunction with additional regulatory reform will assist further in attracting capital to the nascent bourse.
In early June, Temasek, Singapore's sovereign wealth fund, purchased 5% of Ivanhoe Mines (IVN:US) and the world's richest woman, Gina Rinehart, is also believed to be acquiring significant Mongolian mining assets through her company Hancock Prospecting. Turkish Airlines recently announced services from Istanbul to Ulaanbaatar, and MIAT Mongolian Airlines has increased the number of direct flights from HK.
In our view, there has never been a better time to gain exposure to the Mongolian growth story. After almost 700 years of occupation and oppression, and after only just over two decades of democracy, the country is finally on the precipice of financial independence, however for the time being remains heavily dependent on foreign investment. Mongolia is experiencing phenomenal GDP growth – currently the fastest in the world – growth not seen in Mongolia since the last of the great Khans.
Within the next couple of years the country will have the potential capacity to effect global coal prices and will be one of the largest copper exporters in the world. With a massive resource endowment literally on the doorstep of the world's largest and growing commodity consumer, poor infrastructure, a small population, and masses of required development needed in order to extract the country's mineral riches there are ample investment opportunities.
We foresee many attractive IPOs in the coming months, a number of positions we are invested in remain at very attractive entry points, and the long-term growth story and prospects for capital appreciation remain inherently strong.
I will be traveling to Melbourne from 26th July to 3rd August, Singapore from 5th to the 14th August and Hong Kong from 15th to 17th August to meet with our investors and prospects.
I will then travel to Mongolia from the 19th August to 7th September where in conjunction with my colleagues we will be visiting a number of Chinese border crossings, surveying a number of exploration, developing and operating mines, undertaking company visits in Ulaanbaatar, participating in the Discover Mongolia 2012 conference and finally, I will be speaking at Frontier Securities' Invest Mongolia 2012 conference. For investors interested to visit Mongolia, we recommend that the last week of August and first week of September is a great time to gain an intensive insight into Mongolian opportunities, participate in a number of exciting conferences, and meet with officials, regulators and companies.
I thank our investors for their continued support and I look forward to updating you further of our developments next month.
Best regards,
Travis Hamilton
Managing Director KHAN INVESTMENT MANAGEMENT LIMITED
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