The Japanese market offers value – Magnus Heystek

Brenthurst Wealth Management founder Magnus Heystek joins Bronwyn Nielsen to discuss a variety of topical investment themes playing out in the markets. The Evergrande saga turned sentiment negatively with global markets hitting a speed bump. Heystek advocates for the healthcare industry as an investment proposition as well as Japan. Lastly, Heystek advises to steer clear of cryptocurrencies given the lack of regulation in the industry. – Justin Rowe-Roberts

Magnus Heystek on his concerns around Evergrande: 

It’s not only Evergrande it’s the whole political thing in China, which has been roiling markets for a couple of months now. And it’s very hard as a Westerner or Western capitalist to try and figure out what the game plan is. But it’s very, very evident that it’s hurting specific sectors, specific companies, tech stocks, Naspers/Prosus, etc. Now you’ve got this Evergrande thing that is smashing our commodity stocks and especially our iron ore producers and then also platinum. So welcome to the markets. Never a dull day.

On the volatility in the markets: 

If you ask me about the South African commodity stocks, I was always very reluctant to get involved because of the volatility. But I must say that this time around, the volatility was unbelievable. I mean it was in April that all these indices were at record highs, boosting market cap, boosting tax revenue and not even four months later they went down to where they were two years ago. That’s been a very, very volatile period. Whether it’s a buying time, I’m not so sure. We need to watch carefully. And I’ve got a suspicion that there’s going to be some more bad news out of China and therefore still time to be sitting on the sidelines. You might be buying back some stock at much lower levels.

On whether this is ‘dip’ is a good buying opportunity within offshore markets:

As far as equities are concerned that would be correct. To summarise that we’ve been finding better alternatives for growth investors elsewhere in the world, for a very long period of time. But I must counter that also by saying for investors looking for yield, South Africa has been a phenomenal place with your cash yields anything between seven and 11 percent over the last five, seven and even ten years. In fact, I did some analysis yesterday which is quite worrying, if you’re an equity investor in South Africa – that over the last eight years the money market and things like enhanced income funds have beaten all of the SA equity funds over an eight year period of time. And that is very, very unusual and it can continue further. If you want yield, South Africa was the place to be.

On the outlook for the South African market: 

Yes, very much so. I disagree with the bullish comments from our South African asset managers who seem to be perennially bullish on this market. I don’t see the same picture, I see the macroeconomic backdrop as hugely negative for the markets. Consumer consumption, expenditure – flat non-existent. Consumer confidence is flat. Business confidence, our manufacturing is disappearing. So I think that some fund managers are trying to ignore the very, very negative macroeconomic environment when it comes to their forecasts. So why would I maybe try and get some extra growth in the local market? It comes along with very, very high risks. I would rather than and it in Japan, Europe is looking good. Many sectors – Netherlands, Austria are delivering fantastic returns. Why would you confine yourself to one country with massive political and economic situations?

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