The MSE Top 20 Index, which tracks the biggest companies in the planet’s most sparsely populated country, has gained almost 130% in 2021, by far the best performance among the primary equity indexes tracked by Bloomberg.

The gains are reminiscent of the outsized returns seen from meme stocks and cryptocurrencies during the investment craze of the pandemic. Optimists could argue that the foundations of the Mongolian rally may be solid.

The economy posted a 6.3% growth rate in the first half of the year, amid an export surge of commodities including coal and copper, the bulk of which is shipped to China. The giant neighbor’s insatiable hunger for raw materials has been the main driver of the rebound in the resource-rich Mongolian economy.

Thomas Hugger, chief executive officer at Asia Frontier Capital Ltd., says Hong-Kong listed Mongolian Mining Corp. is the best-performing Mongolian stock in his fund. The shares are up 225% this year.

Take Apu Company Ltd., which produces vodka, beer and other beverages, and is up almost 130% this year. The company is the biggest listed on the Mongolian Stock Exchange, with a market value of $517 million.

Ulsiin Ikh Delguur JSC, which operates a 100-year-old Soviet-era shopping mall in the capital Ulaanbaatar, was up by 613% this year as of last week, when MSE Top 20 reached a record high. It has shed some of these gains in the losing streak this week, though it’s still up an eye-watering 315% year to date.

This is not the first time Mongolia’s stocks have performed so well. The benchmark rose 400% in 2007 and then another 138% in 2010. It also posted five straight losing years from 2012 to 2016.

(Bloomberg)