In the vast expanse of Eurasia, a trained investor eye might notice a subtle dust cloud rising on the Mongolian steppes from the gently trotting economy. This trot is set to become an unstoppable gallop as the country, roared on by the mining sector, emerges from the shadows of the Asian Tigers and takes its place as one of the fastest growing in the world.

Currently, the Mongolian economy is experiencing a vigorous recovery from the recent slump. It is expected to expand over 8% in 2010 and then average 20% growth per annum over the next decade, thanks to massive investments into resource projects and the subsequent rise in exports. The government plans to attract USD25 billion into several major mining and mining-related infrastructure projects over the next five years. Development of some 10 of the largest mineral deposits estimated to be worth USD1.3 trillion will provide a huge boost to Mongolia. The USD5 billion economy is expected to triple over the next five years and grow 12 times to reach USD60 billion by 2025.

Mongolia's vast mineral resources and its proximity to China will have transformative effect on the Mongolian economy. Its mining sector is already attracting interest and investments from almost all the major global players. Foreign direct investment (FDI) in the economy continued its dynamic growth despite the global economic crisis. The country attracted USD500 million in 2007, USD683 million in 2008 and USD801 million in 2009. FDI is estimated to exceed USD1 billion for the first time this year. Overall, 61.3% of the USD3.8 billion in FDI has gone into the mining and oil sectors.

Mongolia is the world's best performing stock market so far this year, rising 62.5% as of July 16 in dollar-adjusted terms. The MSE Top 20 Index has been rising since the Mongolian government gave a strong signal about the signing of the landmark Oyu Tolgoi investment agreement with Ivanhoe Mines and Rio Tinto in August last year, which sent the index shooting up 62% in just over 40 days. The index has outperformed the MSCI Frontier Markets Index, which was down 0.9% so far this year as of July 16. We believe that the MSE Top 20 Index will gain over 76% to reach the 11,000 level, putting it among the world’s top-performing markets in 2010.