• Overview of trading activity on the Mongolian Stock Exchange
• Mongolia’s balance of payments posts a surplus in Q1 2026, supported by foreign trade growth
• Terms of trade improve as export price growth outpaces import prices
• Government introduces reforms to improve the efficiency of foreign loans and reduce tax burden
• Caution rises in european equity markets as defense stocks drop sharply
• Strait of hormuz crisis weighs on oil markets as supply risks deepen
• Overview of global capital markets

 

► MONGOLIAN STOCK EXCHANGE

Over the course of the week, a total of 6.06 million securities with a combined value of MNT 16 billion were traded on the Mongolian Stock Exchange. In terms of trading value, Tavilga JSC, Khan Bank JSC, Ard Financial Group JSC, APU JSC and Mongolian Stock Exchange JSC led the market. During the period, a total of one block trade was executed.

• Ard Financial Group JSC (AARD): 121 thousand shares at MNT 2,944, totaling MNT 357 billion;
• Tavilga JSC (TVL): 26 thousand shares at MNT 142,000, totaling MNT 3.7 billion.

Last week, the main indices of the Mongolian Stock Exchange closed with mixed performance, as a short-term correction movement dominated following the previous rally. The TOP-20 Index declined by 1.00% and the MSE A Index fell by 0.66%, indicating increased profit-taking and caution among large- and mid-cap stocks. Meanwhile, the MSE B Index posted a modest gain of 0.13%, suggesting that activity in the small-cap segment has not fully subsided and that selective buying continues. These index movements indicate that the market is transitioning into a consolidation phase rather than experiencing broad-based growth. In particular, following the recovery seen in previous weeks, investors appear to be reassessing their risk exposure. On the other hand, the positive performance of the MSE B Index suggests that a certain level of activity persists in the relatively less liquid segment, although overall market activity shows signs of softening.

INDEX	POINTS	WEEKLY CHANGE
TOP 20 Index	50,835.94	-1.00%
MSE A Index	19,509.76	-0.66%
MSE B Index	14,370.15	+0.13%

 

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⇒ MONGOLIA’S BALANCE OF PAYMENTS POSTS A SURPLUS IN Q1 2026, SUPPORTED BY FOREIGN TRADE GROWTH

According to the Bank of Mongolia, Mongolia’s balance of payments recorded a surplus of USD 95.5 million in the first quarter of 2026, improving by USD 697.6 million compared to the same period last year. The current account also posted a surplus of USD 412.5 million, marking an increase of USD 1.4 billion year-on-year.

Key indicators:

• Current account surplus: USD 412.5 million
• Overall balance of payments surplus: USD 95.5 million
• Exports: +68.3% YoY
• Imports: -7.8% YoY
• Trade balance surplus: USD 2.4 billion
• Services account deficit: USD 1.0 billion
• Primary income account deficit: USD 1.1 billion

This improvement was mainly driven by the merchandise trade balance, with the goods account surplus reaching USD 2.4 billion—nine times higher than the same period last year. Exports increased by 68.3% to USD 4.8 billion, while imports declined by 7.8% to USD 2.4 billion, significantly widening the trade surplus. However, pressures persisted in the services and income accounts. The services account recorded a deficit of USD 1.0 billion, up 26.7% year-on-year. Meanwhile, the primary income account deficit doubled to USD 1.1 billion, largely due to increased profit repatriation and interest payments to foreign investors.

On the financial account, a deficit of USD 85.8 million was recorded in Q1 2026, mainly driven by increased outflows under other investment flows. Nevertheless, net foreign direct investment inflows rose by 2.4 times compared to the same period last year, indicating that foreign investment activity has been maintained to some extent.

Key risk factors:

• Persistently high services imports
• Rising outflows of profits, dividends, and interest payments
• Ongoing financial account deficit
• High dependence of exports on mining and raw commodities

Although Mongolia’s balance of payments improved significantly in the first quarter of 2026, the growth was largely driven by raw material exports and reduced imports. The high level of services deficit and income outflows continues to highlight underlying structural vulnerabilities in the economy.

 

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⇒ TERMS OF TRADE IMPROVE AS EXPORT PRICE GROWTH OUTPACES IMPORT PRICES

According to the National Statistics Office of Mongolia, Mongolia’s terms of trade index reached 97.1 in March 2026, marking a 19.3% increase compared to the same period last year. This indicates that export prices have risen at a faster pace than import prices, reflecting a relative improvement in Mongolia’s trade conditions.

Key indicators:

• Terms of trade index: 97.1
• Year-on-year change: +19.3%
• Month-on-month change: +0.8%
• Export price index: 100.4
• Import price index: 103.4

The export price index increased by 16.3% year-on-year, largely driven by rising prices of gold and copper. In particular:

• Gold price: +86.2%
• Copper price: +56.7%

Meanwhile, the import price index declined by 2.5% year-on-year, indicating a partial easing of import cost pressures. As a result, the purchasing power of export revenues improved, contributing positively to Mongolia’s terms of trade. High commodity prices—especially for gold and copper—have increased export earnings and created favorable conditions for foreign currency inflows. This may provide short-term support to the balance of payments, foreign exchange reserves, and the exchange rate of the MNT. However, the fact that the terms of trade index remains below 100 suggests that, despite improvements in export prices, the index has not yet reached a long-term equilibrium level relative to import costs.

Although Mongolia’s terms of trade improved significantly in the first quarter of 2026, this growth remains largely dependent on price increases in key commodities such as gold and copper. Therefore, fluctuations in global commodity prices are expected to remain a key factor influencing Mongolia’s export revenues and the stability of its external sector going forward.

 

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⇒  GOVERNMENT INTRODUCES REFORMS TO IMPROVE THE EFFICIENCY OF FOREIGN LOANS AND REDUCE TAX BURDEN

At a meeting of the caucus of the Mongolian People's Party in the State Great Khural of Mongolia, Finance Minister Zandanshatar Mendsaikhan presented information on the current status and utilization of foreign loans, as well as proposed amendments to the tax law package. As of last year, the Government’s external debt reached MNT 35.4 trillion, equivalent to 39.4% of GDP, highlighting the continued significant role of external financing in Mongolia’s fiscal and investment policy.

Breakdown of foreign loan financing by sector:

• 26% – Roads and transport
• 22% – Ulaanbaatar city infrastructure and housing
• 14% – Water supply, sanitation, and health
• 11% – Energy
• 9% – Education and emergency services
• 18% – Other sectors

The Government stated that it will prioritize directing foreign loans toward projects with high economic and social returns, reduce inefficient expenditures, and strengthen fiscal discipline. It was also noted that under the Budget Law, approving loan utilization in small annual amounts has delayed project implementation by an average of 5–10 years, increasing debt servicing costs and total project expenses. In response, a draft law aimed at improving the utilization and efficiency of foreign loans is planned to be submitted under an expedited procedure.

At the same time, proposed amendments to tax legislation were introduced, primarily aimed at reducing the tax burden on citizens and businesses and supporting small and medium-sized enterprises (SMEs).

The reforms also include making the business environment more flexible by revising regulations that fully freeze the bank accounts of companies with tax arrears. Under the new proposal, such companies would be allowed to use up to 20% of incoming cash flows, the maximum penalty would be capped at 50%, and the deadline for correcting tax reports would be extended.

Key proposed tax measures include:

• A 1% tax rate for sole proprietors with annual sales revenue below MNT 1 billion
• Exemption from real estate tax when individuals sell their privately owned residential property
• Introduction of a new 15% tax bracket for companies with profits between MNT 6–10 billion
• Reduction of tax to 1% for around 180,000 SMEs with annual revenue up to MNT 2.5 billion
• Increasing the VAT registration threshold from MNT 50 million to MNT 400 million
• Tax incentives for IT and virtual zone companies

The Government’s proposed reforms aim, on one hand, to improve the efficiency of foreign loan utilization and fiscal discipline, and on the other, to reduce the tax burden on the private sector and SMEs to stimulate economic activity. Given the still-elevated level of external debt, the effectiveness of loan usage and fiscal sustainability are expected to remain key concerns for the market going forward.

 

Last week, global equity markets traded in a highly volatile environment, balancing geopolitical risks with continued momentum in AI-driven technological growth. In the United States, the AI and technology sectors continued to lead market gains. In Europe, energy price concerns and broader macroeconomic caution remained dominant themes, while in Asia, a stronger recovery was observed, supported by technology performance and domestic policy stimulus. This divergence suggests that global markets are moving away from synchronized movements toward a more fragmented and segmented dynamic, increasingly driven by sector composition, geopolitical conditions, and monetary policy expectations.

U.S. STOCK MARKET

• S&P 500: +2.36%
• Dow Jones: +0.39%
• Nasdaq:  +5.42%

U.S. equity markets closed higher, with the technology sector once again acting as the primary driver of gains. The Nasdaq Composite surged by 5.42%, supported by strong performance in AI, semiconductor, and mega-cap technology stocks. Meanwhile, the S&P 500 rose by 2.36%, and the Dow Jones Industrial Average posted a more modest gain of 0.39%. Market momentum was largely driven by strong earnings reports and AI investment expectations from technology companies such as Advanced Micro Devices, Arm Holdings, and Qualcomm. Earlier in the week, markets experienced volatility due to tensions around the Strait of Hormuz and rising oil prices. However, by midweek, reports suggesting potential progress in U.S.–Iran negotiations led to a sharp decline in oil prices and a revival in risk appetite. Despite the rally, analysts noted that the gains were not broad-based and remained concentrated in a small group of technology companies.

EUROPEAN STOCK MARKET

• FTSE 100: -1.28%
• STOXX Europe 600: +0.04%
• DAX 40 (Герман): +0.26%
• CAC 40 (Франц): -0.12%

Movements across European markets were relatively limited and uneven. The STOXX Europe 600 closed כמעט unchanged (+0.04%), while the DAX gained 0.26%. In contrast, the FTSE 100 fell by 1.28% and the CAC 40 declined by 0.12%. European markets were strongly influenced by high volatility in oil prices, rising energy cost pressures, and geopolitical uncertainty in the Middle East. In the UK, in particular, higher oil prices renewed inflation concerns and pushed bond yields higher, weighing on the FTSE 100. Additionally, defense sector stocks across Europe pulled back following strong gains in the previous week, as profit-taking activity reduced overall market momentum. While Germany’s DAX remained relatively stable, supported by industrial and export-oriented companies, European investors overall continued to adopt a more defensive stance.

ASIAN STOCK MARKET

• Nikkei 225: +1.36%
• KOSPI: +10.54%
• CSI 300: +0.29%
• SSEC : +1.08% 

Asian markets delivered broadly positive performance, led by a sharp rally in South Korea. The KOSPI surged by 10.54%, marking the strongest rally in the region. The rise was primarily driven by technology, AI, and export-oriented stocks, while intensified foreign capital inflows provided additional support to the market. China’s Shanghai Composite Index (+1.08%) and CSI 300 (+0.29%) also advanced, supported by relatively positive manufacturing data and export figures. Meanwhile, Japan’s Nikkei 225 gained 1.36%. However, throughout the week, volatility increased due to fluctuations in the yen and uncertainty surrounding potential currency intervention by Tokyo authorities. For both Japan and China, investor focus remained on expectations surrounding a high-level U.S.–China meeting, as well as issues related to supply chains and rare earth elements.

 

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⇒  CAUTION RISES IN EUROPEAN EQUITY MARKETS AS DEFENSE STOCKS DROP SHARPLY

As of May 11, 2026, European equity markets showed mixed and cautious movements. Stalled progress in U.S.–Iran peace negotiations renewed geopolitical uncertainty, directly affecting investors’ risk assessments.

Defense companies that had rallied last week on expectations of diplomatic progress underwent a sharp correction:

• Rheinmetall: -3.6%
• Renk Group: -3.2%
• Leonardo S.p.A.: -4.4%
• Hensoldt AG: -3.4%
• Babcock International Group: -3.5%

The pullback followed earlier gains that had been driven by optimism over easing geopolitical risks. After U.S. President Donald Trump stated that the conditions proposed by Iran were unacceptable, investors began reassessing risk exposure.

According to Iranian sources, Tehran demanded a cessation of hostilities on all fronts and the lifting of sanctions, while Israeli Prime Minister Benjamin Netanyahu stated that “the war related to Iran is not over,” signaling that regional tensions are unlikely to ease in the near term.

As a result, oil prices rose again, with Brent Crude remaining at elevated levels, increasing risks of inflationary and production cost pressures across Europe.

Investor attention is also shifting to President Trump’s planned visit to China, where discussions with President Xi Jinping are expected to cover trade, rare earth elements, and geopolitical issues. These topics are particularly relevant for European industrial exporters.

In particular, German industrial firms remain highly dependent on Chinese demand and supply chains, making the DAX sensitive to developments related to China.

Amid geopolitical uncertainty, energy price risks, and cautious monetary policy expectations, investors are partially shifting toward defensive positioning, and markets continue to show selective and sector-divergent movements.

 

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⇒ STRAIT OF HORMUZ CRISIS WEIGHS ON OIL MARKETS AS SUPPLY RISKS DEEPEN

Amid ongoing geopolitical tensions among the U.S., Israel, and Iran, Saudi Aramco CEO Amin Nasser stated that roughly 1 billion barrels of oil supply shortages have accumulated in global markets over the past two months. In his view, even if disruptions around the Strait of Hormuz ease and flows normalize, the oil market’s ability to stabilize in the short term remains limited.

He emphasized that years of underinvestment in the oil sector have weakened spare supply capacity, making the current geopolitical shock more acute. In response, Saudi Aramco has been actively utilizing its pipeline system capable of transporting up to 7 million barrels per day from the Persian Gulf to the Red Sea.

Key market drivers:

• Disruptions around the Strait of Hormuz have heightened global supply risks
• Oil inventories have fallen sharply to historically low levels
• Persistent underinvestment in the energy sector continues to pressure supply resilience

As of April 2026, global oil inventories reportedly declined by 200 million barrels, marking one of the steepest drops in recent years. Estimates cited from S&P Global suggest that while global oil demand fell by 5 million barrels per day, supply contracted by 6.6 million barrels per day, creating a more severe supply-side shock.

Although there are still volumes of crude oil that have been produced but not yet refined, much of this is tied up in maintaining refinery operations and transport logistics. As a result, truly “available” spare inventories remain limited. Given these conditions, markets assess that if geopolitical tensions persist, oil prices are likely to remain elevated for an extended period.