Commodity counters are a no go – Magnus Heystek

Brenthurst Wealth Management founder Magnus Heystek leads Wednesday’s market insights with the veteran investment strategist covering a number of topical investment themes. Magnus outlines that currency fluctuations shouldn’t be the only factor when choosing an investment destination, with growth prospects being an important element. Magnus has had his radar on the Japanese stock market for a while and he says the change in politically leadership is going to have a positive impact on the country’s economy. Sygnia’s diverse range of ETF products and the volatility in the commodity counters round up the conversation. – Justin Rowe-Roberts

On the volatility of the Rand: 

One must bear in mind that the last five years the Rand has actually not declined substantially against the dollar. It was volatile during that period. But the Rand at R15 is roughly where it was five years ago, which is very surprising. But nevertheless, our stock market did not have a great period. So anything linked to our market, notwithstanding the stable Rand, has not performed very well. The reason why the Rand was so stable is that we had a very accommodative monetary stance by the US Federal Reserve – the pumping of money into the system – humongous amounts of money into the system and keeping interest rates low in the States. We seem to have reached the point where interest rates in the United States can start moving higher. That is a very definite warning sign of the Rand dollar exchange rate. On the other hand, at the same time as these things happen, we’ve got the slowdown in China with the Chinese government trying to cool down the economy and the impact on the housing and construction. They’ve been heavy buyers of our products all along. And if that also comes at the same time, that’ll put pressure on our balance of payments.

On what’s changed in Japan to make it an attractive investment destination: 

Well, the politics. There’s a change of government taking place and they are hoping that the new guys who come in will be more accommodative and more free market orientated and pump more money into the system. But Japan has been a very nice diversification from the US over the last 10 years or so. We don’t talk about Japan in South Africa. We don’t understand the language, the culture , the market so we never talk about Japan. But you’ve got to remember the Japanese stock market – if memory serves me correct – is still the third or fourth largest stock market in the world. It’s a massive, humongous stock market with many global companies listed on it. You name it, they’re there. But we just don’t have anybody following Japan from South Africa so tends to be forgotten. We have been putting some money in Japan, and it does very well when the rest of the world tanks. It comes through and it gives you what it should be doing, some diversification. The Japanese stock market is up around 6% this month whilst the rest of the world is down between 2% and 20%.

On economic cycles: 

You’re not from a South African perspective, you must understand, you have to look at other parts of the world and they all go in cycles. Nothing goes in the same cycle. Last 10 years have all been developed markets – particularly the USA. There will be a time when the emerging market starts outperforming. Then in that broader market, you’ll have markets within markets that will do better. Taiwan, for instance, will do better than Hong Kong for instance. But you’ve got to keep your eye on the ball.

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