In a dynamic interview with Bronwyn Nielsen, David Shapiro forecasts a potential strengthening of the Rand, anticipating significant movements below 17.50. Emphasizing both local initiatives and global economic trends, Shapiro discusses promising sectors like weight loss pharmaceuticals, highlighting Novo Nordisk and Eli Lilly as key players. His insights into the bond market’s resilience and the transformative potential of medical innovations underscore optimism amidst evolving market conditions, making this dialogue essential for investors navigating today’s economic landscape.”
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Highlights from the interview
In a recent interview with Bronwyn Nielsen, David Shapiro provided a comprehensive analysis of both local and global economic prospects. Shapiro expressed optimism about the South African market, citing potential strength in the rand driven by anticipated interest rate cuts locally and abroad. He highlighted the resilience of the bond market and suggested continued opportunities for investors, particularly in sectors like pharmaceuticals. Shapiro specifically endorsed investments in weight loss drugs, pointing to companies like Novo Nordisk and Eli Lilly as leaders in this burgeoning field, which he believes offer substantial growth potential.
Turning to global markets, Shapiro underscored the enduring dominance of technology stocks, noting their pivotal role amidst ongoing technological advancements, particularly in artificial intelligence. He emphasized the broader economic implications of tech innovation, highlighting the multiplier effect across related industries such as data centers and semiconductor production. Shapiro’s insights painted a picture of cautious optimism, tempered by global economic uncertainties and the need for continued policy stability domestically. His outlook, grounded in extensive market knowledge and historical context, provided valuable guidance for investors seeking opportunities amid evolving market dynamics.
Edited transcript of the interview ___STEADY_PAYWALL___
00:00:11:17 – 00:00:39:06
Bronwyn Nielsen: With me now is David Shapiro from Sasfin Securities. And David, I’ve missed you. That’s where I have to start. We haven’t engaged for ages, and so much has changed. We are in a bull market, it appears. But first of all, just give us a sense of how you are navigating the current environment in South Africa with this rally in equities.
00:00:39:10 – 00:00:42:13
Bronwyn Nielsen: The rally in the randâis it sustainable?
00:00:42:15 – 00:01:14:18
David Shapiro: I hope so. I say I hope so because certainly for the last couple of years, I have been very positive offshore and have shifted an enormous amount of money offshore, you know, waiting for something positive to happen. I think the election has now opened the way for us to move ahead. I say when I say move ahead, it’s the first time in many, many years that I’ve seen optimism around South Africa.
00:01:14:20 – 00:01:35:06
David Shapiro: And it’s a very potent force, you know, optimism. It can be a big driver of energy and a big driver of growth. So we’ve got to hope that we can stay that course. You know, the one thing that’s evident, and you know, from the interview that you’ve just done with Marthinus from Rainbow.
00:01:35:08 – 00:01:58:09
David Shapiro: South Africa has some wonderful businesses, you know, that have been hurt by a stagnant economy and an impotent economy. So I think that if we can then unleash that force, you know, there’s plenty to be positive about South Africa. But it’s not going to come easy. That’s the point. It’s not going to come easy.
00:01:58:11 – 00:02:35:18
Bronwyn Nielsen: I was listening to an interview that I did with Helen Zille, the federal chairperson of the Democratic Alliance (DA), and she was saying exactly what you are highlighting. It’s going to take time. This is not a quick fix. It’s a complicated political scenario, but the positive momentum is there. Alec and I were also chatting last week that it is groundbreaking in terms of, for the first time, having more voices at the table, more checkpoints in terms of what is being executed on the public policy side.
00:02:35:20 – 00:02:43:09
Bronwyn Nielsen: So great if we can maintain this, but we’re going to have to be patient. And that was what Helen Zille was saying. I think that’s what you are echoing as well.
00:02:43:14 – 00:03:07:19
David Shapiro: Funny, I wrote an article today in the Jewish Report, and I was asked to write something about how I see things. My conclusion, and I’ve been saying this for a long time, is that people will invest in a country in which they want to live, work, and bring up their children. So you’ve got to create that environment.
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00:03:07:22 – 00:03:19:00
David Shapiro: You don’t need fancy strategies. You don’t need massive industrial, what’s the word?
00:03:19:02 – 00:03:21:10
Bronwyn Nielsen: Depends on what you read.
00:03:21:12 – 00:03:42:13
David Shapiro: Sorry, I lost my way there, but I’m saying you don’t need that because people are natural investors. They’re natural entrepreneurs. And I think in order to do that, you’ve just got to create an environment where we all behave ourselves, stick to the rules. And I think there’s enough goodwill in South Africa to drive this forward, you know, and we’ve seen it in the past.
00:03:42:15 – 00:04:05:19
David Shapiro: So do not believe that people really want to pack up their bags and go. You know, it’s an easy country in which to live. You’ve got some wonderful people here, and I think all you need to do is enhance these forces. The infrastructure is there; we just need to maintain it a little, spend a bit of time fixing it all up.
00:04:05:21 – 00:04:28:16
David Shapiro: But I think that it’s not as though it’s not there. It’s there, but it hasn’t been maintained. So I think if we can get that going, and also Bronwyn, you’ve got a massive mining sector, you’ve got massive opportunities, whether it’s in farming, whether it’s in tourism, that you can embrace. And this is what we tried to embrace 50 years ago.
00:04:28:18 – 00:04:38:03
David Shapiro: You know, I always say the train never left the station. And I’m just hoping this time that it leads on that. So, yes, we can do it. And I think this has given us some kind of hope.
00:04:38:07 – 00:05:04:18
Bronwyn Nielsen: So let’s talk about the markets and coming back to that point of sustainability. Because, David, you’ve been through many of these cyclesâpolitical, economic, you’ve seen the ebbs and flows. Most people, they’re saying, should we be getting into the market right now? And I know that you’ve got that proverbial statement, alongside with so many different expert market players, that you don’t try and time the market.
00:05:04:20 – 00:05:08:22
Bronwyn Nielsen: But I think everyone’s looking and saying, have I missed the rally? Should I get in now?
00:05:09:00 – 00:05:32:04
David Shapiro
You know, I think there’s got to be a global rally. Okay, that’s in our favor. You know, I still remain very positive on the US markets. We’re going into a period where rates are going to start coming down. That will lead to rates coming down in the rest of the world, certainly Europe and the UK. That will follow through and percolate here as well. We’ll start to see rates coming down. So, you go into a period where global markets are brimming and moving forward, which gives you a lot to work with. So, I think what we need to do now is watch in South Africa if we can start working on the economy and getting people to believe in South Africa because the government doesn’t create jobs.
00:05:32:06 – 00:06:03:12
David Shapiro
I’m not the one who made this up. You know, this, I’ve taken from someone else. Government doesnât create jobs. It’s businesses that create jobs. So, when they get the confidence, they will create the jobs. I think what we do have to address is our broader issues. We have to start easing back on political ideology, you know, things that have kept us backward, things that actually restrict or prevent foreigners from coming out. So, you know, we need to put that out there. You’ve got to roll out the red carpet, as they say.
00:06:03:14 – 00:06:28:17
David Shapiro
Sorry, I lost my way there, but I’m saying we need that red carpet for foreign direct investment and not put obstacles in people’s paths and say, this is the way you have to behave. This is who you have to employ. If we do that, everybody will benefit. So, I’m hoping this government of national unity will start to address those issues that have kept foreign investment from coming into this country.
00:06:28:17 – 00:06:41:23
Bronwyn Nielsen
I was listening to Kookie Kooyman. Obviously, we go back a long time with Cooky on various business news desks, and he was talking about the positivity in the financial stocks, given what we’ve seen and the positive sentiment around the GNU, Government of National Unity. How do you feel about the banking play, just from Kokkie Kooyman?
00:06:42:00 – 00:07:09:06
David Shapiro
I think the one thing about South Africa, through all the bad times, is that the financial sector has been solid, you know, credit to the Reserve Bank, credit to Treasury, credit to the way that our banks have been run, and the JSE. Despite the criticism that the JSE has come under, it still maintained its course. It still runs a very good operation. So, I think that gives investors big confidence at the moment. What I’m looking at, and I’ve been talking about this quite a bit, is I like the long end of the bond market.
00:07:09:10 – 00:07:38:09
David Shapiro
You know me, I’m an equity trader. I’m not a bond trader. You can plug in rates of ten and a half, 11.5, and those are going to come down as things improve. What that’s going to do as well is it’s going to have an effect on the whole market in the sense that once rates start to come down, it means that the dividend yields that you’re getting on banks become even more attractive. Are they going to be bought? Even if you look at the property market, Bronwyn, you’ve seen some big, big moves there as well as people start to look at the property segment, which has been under pressure for a long time simply because of the yields you’re going to get.
00:07:38:11 – 00:08:02:06
David Shapiro
And that’s another segment that has been incredibly well-run. We’ve got some very good operators that have suffered as a result of high interest rates and also because of a very sluggish economy and the other issues we have from load shedding and higher costs and other things that have come in trying to run the operations. So, I think when you start to look at that, there are opportunities in that. I respect Kooky, you know, he knows significantly more than I do about that area of the market.
00:08:02:06 – 00:08:17:01
Bronwyn Nielsen
So, banks aside, you mentioned property. Where specifically are you seeing value? Can you give us a little insight?
00:08:17:02 – 00:09:27:08
David Shapiro
I think, you know, I’m not a property expert, but I always look at yield and I’m saying, where can clients put safe haven money and get good returns? I’m sure in some of the, you know, if I start recommending, it’s not because I haven’t done the research, but, you know, I was looking at Growthpoint, I was looking at Redefine, I was even looking at storage. I was looking at the gains that had been made in these kinds of businesses. So, I point people in that direction to have a look at property stocks. You’ve got to do your research and you’ve got, you know, the same question that I asked Marthinus earlier: how will interest rates coming down start to impact those segments?
00:10:17:01 – 00:10:30:00
David Shapiro:
I think those are going to be first out the block. Then we’ll start to see the benefits of consumers having more money in their pockets as rates start to come down, and they spend more and feel a bit more confident.
00:10:30:02 – 00:10:34:11
Bronwyn Nielsen:
Any other sectors in the South African market before I push you to the offshore markets?
00:10:34:13 – 00:10:57:15
David Shapiro:
Yeah. Well, our miners have come under pressure. Just to go back a bit, the JSE is 80% offshore. You know, when you look at the miners and all those big giants, AB InBev, British American Tobacco, Naspers, Prosus, all of those.
00:10:57:17 – 00:11:27:07
David Shapiro:
So, the JSE Inc. is actually a very small segment, but there are some very decent companies within it. What I think will happen as rates start to come down, and the dollar eases back a little, is that you’re going to see commodity prices pick up. This segment, not necessarily related to the government of national unity, could start to pick up. The one worry is on China.
00:11:27:07 – 00:11:46:21
David Shapiro:
But even China is starting to realize that they have to start pushing up their economy and giving it some stimulus because commodity prices have come down as a result of that. So, that’s an area we have to watch as well. But I just think it’s all going to come together.
00:11:46:21 – 00:12:09:18
David Shapiro:
You don’t feel optimistic just to feel optimistic; there’s a reason for it. I think as we start to see rates come down, we’d be through really tough years from Covid to the wars and so on. And I think we’ve gone through that, and we will start to see growth becoming an imperative for a lot of global economies.
00:12:09:20 – 00:12:28:02
Bronwyn Nielsen:
We’ve chatted for so long about your offshore thesis, and I wish I had listened to you when you first put Nvidia into the conversation. You were saying Nvidia, Nvidia, and Nvidia, and look at where it is now. I think you started talking about Nvidia back in 2017.
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00:12:28:04 – 00:12:58:05
David Shapiro:
Yeah, for the wrong reasons. But nevertheless, I still think that tech is going to be the dominant force globally. We might be slightly overbought, but I don’t think we are grossly overbought. These are very powerful businesses, and the more I read into it, the more you understand how artificial intelligence is going to help us do what we do.
00:12:58:07 – 00:13:22:19
David Shapiro:
The other point is that with all the spin that takes place, we forget that there’s a multiplier effect. I was talking to someone yesterday about data centers. I said, you know, you think it’s only Nvidia’s chips that are going in there, but when you build a new modern data center, you need cooling, power, wiresâall those things that go into the investment.
00:13:22:19 – 00:13:44:13
David Shapiro:
There’s a wide supply chain in the kind of spin that’s taking place for AI, and that’s going to continue for many years. So, it’s not time to sell all your big ones, like Microsoft, Alphabet, Amazon, and Nvidia. You can play this out for some time, and it’s also going to give opportunities to other stocks that we haven’t paid attention to. So, there’s a lot of choice of where you can go.
00:13:44:15 – 00:14:02:19
Bronwyn Nielsen:
You’re sounding very positive on both the local and international fronts. But again, the other stats need to be demonstrated to give us the certainty that sanity will prevail. What we’ve seen from the political side, David, just in terms of the randâyou know, we’ve seen the strengthening and in that optimism, you mentioned dollar strength potentially coming to the fore. Interest rate cuts…
00:14:02:21 – 00:14:33:11
Bronwyn Nielsen:
Actually, you were saying the dollar is going to come back, didn’t you?
00:14:33:12 – 00:14:36:06
David Shapiro:
A weakness. Well, not weakness, but it’ll ease back. Yeah. It’ll ease off its highs. That’s going to help the rand.
00:14:36:08 – 00:14:45:08
Bronwyn Nielsen:
It was the same thing that Marthinus was mentioning earlierâthat the rand is such a key player in their business from an input perspective. Do you think we can find some stability at these stronger levels for the rand?
00:14:59:21 – 00:15:20:22
David Shapiro:
I think you’ll get a much better rand. You’ll get around 17.50, even lower than that. When it moves, it moves fast. So, I think if all of this comes together, you can. There are two forces: there’s a local force, which is up to us and the government, you know, to stand by what the president said yesterday.
00:15:21:00 – 00:15:42:20
David Shapiro:
And then there’s the international side. Once rates start to ease back in the US and Europe, you’re going to have rates coming down in Europe, the UK, and other places as well. So that might be a balancing force for the dollar. But I think the dollar is perhaps a little too strong, and you know it’ll come down.
00:15:42:20 – 00:15:51:15
David Shapiro:
I wouldn’t be surprised if we see a much stronger rand. In the 17.50 area, it’s certainly doable.
00:15:51:20 – 00:16:01:02
Bronwyn Nielsen:
I’m going to be a little cheeky and borrow from our prior relationship. Do you have a hot stock for me, Mr. Shapiro?
00:16:01:04 – 00:16:23:23
David Shapiro:
You know what I like on the local market. I’ve mentioned where I’m looking. I still think that for people warehousing money, our bond market is still attractive. It’s moved a lot, but I still like it very much. And you’ve got to appreciate where it’s coming from, from an equity perspective.
00:16:24:01 – 00:16:47:22
David Shapiro:
But on the offshore side, one area I like very muchâand I know I’m going off on a tangentâis weight loss drugs. Moving away from technology, Novo Nordisk and Eli Lilly. I do a lot of reading into where weight loss drugs are going. There was a report yesterday from India where they purportedly have 18 million obese people and 240 million people who are overweight and can’t get these drugs, which are genuine drugs. These are not celebrity drugs.
00:16:48:00 – 00:17:19:22
David Shapiro:
These are not for Kim Kardashian or whoever to lose a kilo or so. These drugs have real long-term benefits. Obesity and diabetes are very serious killers. These proven drugs not only help you lose weight and improve your life but also have many other benefits. So, this is an area to watch as an investment. Novo Nordisk and Eli Lilly, and I’m sure many other companies will soon come out with similar drugs.
00:17:20:00 – 00:17:44:17
Bronwyn Nielsen:
You mentioned Eli Lilly. What about the relationship with Aspen from a local perspective?
David Shapiro:
Exactly, because I think they could get the license to produce those drugs here. Watch out for that news. Believe me, the demand is insatiable. If you go to any chemist in South Africa and ask for those drugs, they’ll take out 20 foolscap pages of names on the waiting list.
00:18:11:22 – 00:18:14:00
Bronwyn Nielsen:
But that actually is…
00:18:14:00 – 00:18:14:19
David Shapiro:
No.
00:18:14:21 – 00:18:29:10
Bronwyn Nielsen:
That’s not a deal with Eli on the weight loss drugs. I’ll definitely get Stephen’s side lined up and see what I can do on that front. David, such a pleasure. I missed you at the beginning. Have you missed me?
00:18:29:12 – 00:18:39:17
David Shapiro:
It’s not my fault you don’t phone me. I’m always around. As soon as you send an invitation, I accept it. I didn’t say I was busy.
00:18:39:19 – 00:18:46:22
Bronwyn Nielsen:
I look forward to many more engagements. It’s so good to have this conversation again with you, David Shapiro from Sasfin Securities. Thank you so much.
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