Lately the banking sector has become the focus of attention for Mongolia’s capital markets and IPO-hungry investors.

Earlier this month, State Bank, one of Mongolia’s five systemically important banks, listed 5 percent of its shares, raising MNT 25.4 billion (USD 7.9 million). That listing was the first of what is expected to be several IPOs over the next year and a half for this country’s biggest banks.

Activity on the Mongolian Stock Exchange, which has a market cap of USD 1.6 billion, has been accelerating with help from a robust string of bond sales and public offerings. The mineral-rich nation has long sought to diversify its assets beyond the mining space – the stock exchange is seen as a vehicle to pump investment into other sectors, including food production, banks, and textiles.

The State Bank IPO generated considerable interest and was three-times oversubscribed, Kh.Altai, chief executive officer for the stock exchange, told. State Bank’s shares have since surged 76 percent on the secondary market.

But State Bank was just the first of several major banks to list on the MSE this year. Mongolia’s four other SIBs – XacBank LLC, Khan Bank, Trade & Development Bank and Golomt Bank – are all expected to list on the MSE by the end of next year. Two of these banks are expected to list shares on the exchange this year, followed by two in 2023.

The new listings could help boost a market that has slumped 18 percent this year. Bank IPOs is driven by Mongolia’s updated banking code, adopted last year. The code requires systemically important banks to be listed, and to cap a bank’s shareholding rights at 20 percent by the end of 2023. Fitch Ratings reports on its Mongolian Banks Dashboard the new requirements will improve transparency and strengthen the banking system’s governance.

The code amendment that is pushing Mongolia’s banks to go public consists of two phases. Phase one requires the systemic banks to list 20% by June 30, 2023 and phase two requires these banks to list 80 percent of shares by 31 December, 2023.