Foreigners keep selling SA investments and that’s the most important indicator of sentiment – Magnus Heystek

Magnus Heystek joins the BizNews Power Hour as co-host to talk us through the nitty gritty of his article ‘The lost decade and how your wealth has evaporated‘ which is one of the best read pieces on this week. Heystek’s hard-hitting approach to offshore investments and diversification as well as his negative outlook on South Africa as an investment destination has seen him earn a number of critics in the local asset management industry. However, the facts cannot be denied – if you had been a follower of his investment thesis you would be wealthier today than if you had not. Heystek believes this trend is set to continue. – Justin Rowe-Roberts

Magnus Heystek on his article ‘The lost decade and how your wealth has evaporated’: 

I am talking about the personal wealth of everybody who reads my columns and reads your publications and websites. It’s the man in the street, whether you are upper middle class or lower wealthy or even upper poor, whatever – everybody has a little wealth. The last decade we always focused on the political damage, the damage to the organisations and state enterprises. I was shocked when I finalised the study. I thought let’s see what has happened with your money over the last 10 years. I’m talking about your stock market investments, your pension fund, your residential property and of course, cash. That’s the typical spread of middle class wealth. Throw that into a pot and actually measure that and then compare it with what’s happening elsewhere in the world. It shows that the last 10 years has been a very poor period for South African investors, both in global terms – that’s the one part of it – and then as far as inflation is concerned – we barely managed to eke out a 1% or 2% real growth rate in our equity investments, which is the main driver of our wealth. Our pension funds over the last eight years have not beaten inflation and that applies to retirement annuities, preservation funds and provident funds. We see that every day in our practice.

On where to be positioned for the next ten years: 

If you assume that the situation is not going to change in South Africa relative to the economic trends in South Africa and the relative investments, it will still be my recommendation to consider taking a big chunk of your money offshore and say, let’s allocate that to other parts of the world that are not being affected by events in South Africa. And hopefully I can have some alpha – some above average growth in my portfolio and that will kick in in five or ten years from now. I had this discussion last night with a very long standing old friend of mine, I actually took her money offshore about nine years ago. She’s so utterly thankful today because she’s now at retirement age and she can afford to look after her parents, she can retire and travel and she realises that as a result of my push. We can’t do that with everybody. Not everybody likes the volatility of the currency and that is a given. I still remain of the view, there is fantastic stuff happening elsewhere in the world. You can start in Japan. Japan has just kicked into life. So have some money in Japan. The US is still outperforming everything.

On what trends to look out before South Africa becomes a viable investment destination: 

What I look at every week, one of the first things I look at – is the net buying or selling of stocks and bonds by foreigners. That’s published every week. I wait for those figures and today it came out again, net sales of R4bn in the equity market and also about R4bn in the bond market, pushing that up to R100bn sales so far this year. That explains why our market is weak. I will start there – I look at what the foreigners are doing because they are a big player in our market. For the last five years they’ve been selling. So if that starts turning around our market will react very, very positively. I will talk about it if that happens but I haven’t seen it yet. It’s the most important indicator.

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