The Mongolia Stock Exchange (MSE) Top 20 Index is approximately up by 74% year-to-date, marking the largest gain among all benchmarks tracked by Bloomberg.

The growth has been driven by commodities companies, and mainly coal companies such as Tavan-Tolgoi due to soaring coal exports driven by newfound demand for Mongolian coal in China - which can no longer buy North Korean coal due to sanctions. Moreover, despite Mongolia's weak credit profile, gaping budget deficit, and political uncertainty, investors have been relying on the International Monetary Fund’s (IMF's) $5.5bn bailout deal. Under that deal, Mongolia now finds itself receiving support from a number of sources including the IMF, the World Bank, the Asian Development Bank and the International Investment Bank.

The country, having the best performing stock market benchmark in the world for 2017, is now able to borrow on the open market again, as it did last month, when the Mongolian government raised $800mn from an offshore dollar bond issue on October 26. The five and a half year bond was priced at 5.625% with the order book exceeding $5.5bn.

Bloomberg noted the latest bond issuance was a turnaround for Mongolia, which only attracted $750mn of bids for a $500mn bond sale last year. Both Moody’s Investors Service and Fitch Ratings cut their ratings on Mongolia last year.

Despite warnings from credit agencies about the vulnerability of “frontier markets” to rising global interest rates, investors have shown a willingness to fund governments with lower credit ratings borrowing in foreign currencies this year.