Investment strategist Magnus Heystek discusses the bullish US markets and their global ripple effect, with South Africa benefiting. He cautions that Middle East tensions could derail this growth. Heystek also shares insights on the rand, property investments, and why he’s bullish on Tesla despite valuation concerns. Heystek spoke to Nielsen Network CEO, Bronwyn Nielsen.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Watch here
Listen here
Edited transcript of the interview ___STEADY_PAYWALL___
Bronwyn Nielsen (00:01.194)
Magnus, we’re seeing international markets fuel positive sentiment on the local front. Jobs data out of the US has been better than expected, and that’s driving positivity across the board. Of course, market commentators remain cautious due to the escalating tensions in the Middle East. I’d be interested to hear your take on the international dynamics impacting us at the moment.
Magnus Heystek (00:32.487)
Yes, Bronwyn. Whenever you look at markets, you have to start with the United States. We tend to think the JSE and South Africa are at the center of the world, determining market trends, but that’s not the case. We’re a very small player in the global scheme of things, and it’s all driven by what’s happening in the US and globally. What do we have right now? A phenomenal bull market in the US. It hasn’t stopped this year. Whether you’re looking at the NASDAQ, the S&P 500, or even the smaller caps—Alec has even started buying into those—the US market has been on a tremendous tear.
And then there’s the classic formula: when the US cuts interest rates, markets around the world boom, including South Africa. We’ve benefited tremendously, with a strong month and quarter in South Africa. The rand has strengthened, perhaps overshooting in the short term. Emerging markets, including South Africa and China, are making a comeback thanks to China’s stimulatory package. It’s all going well right now. Whether your money is offshore or in South Africa, you’re making gains in both dollar and rand terms.
Bronwyn Nielsen (02:00.374)
Is there a big “but”? I don’t want to interrupt, but please go ahead.
Magnus Heystek (02:03.963)
The “but” is, of course, what could happen in the Middle East. That could derail this “Goldilocks” scenario. It depends on what happens between Israel, Iran, Hezbollah, and Hamas. That’s something we need to watch closely. Then, just to add some extra spice, we have the US presidential elections coming up in less than 30 days. People are starting to ask, who’s better for the markets? Trump or the other candidate?
Bronwyn Nielsen (02:44.294)
Who do you believe is better for the markets? Everyone’s talking about the “Trump trade.” Are you in that camp?
Magnus Heystek (02:50.842)
I believe Trump would be better for the markets. Without delving too deeply into politics, I think he’d be more decisive in the actions he’d take. The Democrats lean towards socialism—more taxes, more intervention—which generally isn’t liked by markets. Personally, I’m a Trump supporter, and I think if he wins, it will be good for the markets and for a stronger rand.
But this is the nature of markets; we don’t know 100%. You have to diversify your bets. It’s not like a horse race where you put all your money on one horse and hope it wins—it could break a leg.
Bronwyn Nielsen (03:37.014)
We’ve got another set of key economic data coming out of the US. The sentiment at the moment is that we’ll see an additional interest rate cut from the US Federal Reserve in November, by 25 basis points. All things being equal—considering the Middle East tensions you’ve mentioned—this should continue to fuel positivity in the markets. Rate cuts are stimulatory, and we’ll likely rally on the back of that. What are your thoughts on gold, given its potential safe-haven status with the Middle East tensions?
Magnus Heystek (04:22.488)
Gold has proven to be an excellent investment over the past 10 to 15 years, and the last year in particular has been exceptional. It serves as a safe haven in times of uncertainty. It’s a pity that South African investors aren’t more invested in gold. It’s difficult to invest directly in gold on the South African market. You can buy Krugerrands over the counter at banks or invest in gold ETFs, but you can’t directly hold gold in South Africa like you can offshore. However, gold has played its historical role well, protecting value, though not necessarily offering runaway capital gains. At $2,600–$2,700 an ounce, gold is at an astonishingly high level, and it’s been rising ever since Gordon Brown sold most of the UK’s gold at $250 an ounce around 25 years ago.
Bronwyn Nielsen (05:33.630)
You mentioned the rand is overcooked in your opinion. Do you expect it to weaken from the current strong levels we’ve been seeing?
Magnus Heystek (05:43.286)
Yes. At the start of the year, when the rand was at 19.30 or 19.40, I told Alec I wouldn’t take money out of the country at that level. Back then, everyone was suddenly recommending offshore investing. There were seminars, webinars—everything. But I said no, not at 19. I might reconsider at 17 or around there, and now I think it’s perhaps time to consider taking money out at a nice discount. The short-term movements of the rand are unpredictable and depend on many factors, such as interest rate differentials, Middle East uncertainties, and the renewed focus on emerging markets. China is also a key factor. If China stimulates its economy, it will benefit South Africa because they buy our resources.
Bronwyn Nielsen (06:49.664)
At the recent BizNews Investment Conference, you spoke about your interest in property in South Africa. Calgro M3 is in the property game, and their results came out today. What are your thoughts on property investments in South Africa, and where specifically would you be buying?
Magnus Heystek (07:11.902)
In the listed space, property has had a terrible eight or nine years. You haven’t made any money. But now, with Eskom improving its efficiency and interest rates starting to decline, it seems like the decline in economic activity is leveling off. A year ago was already a good time to start buying or at least nibbling at the property market. If this scenario holds—interest rates continue to drop, economic activity picks up, and Eskom can produce reliable power—the listed property space is a good place to be for institutional or retired investors looking for capital growth and income.
On the residential side, you have to consider the municipality in the area you’re buying. Unfortunately, there are few areas outside the Cape where I would consider buying. But I’ve been buying in Cape Town itself and the Paarl region. These areas have been doing much better than the rest of the country, and that trend will continue. The migration to the Cape from the rest of the country is understated. I don’t think people realize how many have moved there. You can see it in the traffic—it’s astonishing how congested the Western Cape has become, from Bellville to Cape Town, the Atlantic Seaboard, and even areas like Paarl, Stellenbosch, and Somerset West.
Bronwyn Nielsen (09:19.498)
Do you think that trend will continue, with more people moving to the Western Cape?
Magnus Heystek (09:22.963)
Yes. The Western Cape is in a fortunate position. I was in Hermanus recently for an investment conference, and I noticed busloads of tourists arriving—Chinese, Indian, Germans, Scandinavians. The Western Cape benefits from tourism, and wealthy Europeans who spend six or seven months of the year here. This, combined with the flow of people from other parts of South Africa, supports the market. Cape Town is essentially a separate province when it comes to residential property. The rest of the country, especially up north, is in a terrible state. There’s just no activity.
Bronwyn Nielsen (10:30.146)
I want to circle back to the international space, specifically Tesla, which released results last week. Alec had a conversation with Walter Aylett from Aylett & Co. and also pulled in Cy Jacobs from 361 Asset Management. Both believe Tesla is way overvalued. What’s your stance?
Magnus Heystek (10:55.471)
I don’t know enough about Tesla to debate with Cy Jacobs and Walter Aylett. But I’ve been watching what Elon Musk has been doing, and I’ve read reports that Tesla isn’t just an automotive company—it’s a software company. With innovations like robot taxis, I’d be hesitant to exclude Tesla from my portfolio. I visited the Tesla factory in 2017 during an investment tour, and after the presentation, I realized we should be buying Teslas. I won’t sell mine, no matter what others say. With all due respect to Cy and Walter, I politely disagree with their assessment.
Bronwyn Nielsen (12:09.160)
Magnus Heystek, it’s always a pleasure. Thank you so much for joining us on BizNews.com.
Magnus Heystek (12:15.193)
Thank you, Bronwyn. Have a great week.
Read also:
