Director’s Cut: Piet Viljoen – Why SA shares are beating the MAG7 and the US party won’t last

Value investor Piet Viljoen explains why South African assets are outperforming Big Tech, why US markets are over-owned, and why emerging markets may be on the brink of a long bull run..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.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.Watch here.Listen here.BizNews Reporter.For much of the past decade, South African investors were told the same story. Get your money offshore. Avoid local assets. America is where the growth is. The MAG7 will carry everything else with them.Eighteen months later, that consensus looks increasingly tired.South African shares, bonds and the rand have delivered a remarkable run. In US dollar terms, many local assets are up more than 40 percent. The South African ETF listed in New York has outperformed much of big tech. And yet, as value investor Piet Viljoen points out, very little has actually changed politically or structurally inside the country.That is precisely the point.Viljoen argues that markets often move not because of political drama or headlines, but because of valuation, flows and fundamentals aligning. Right now, South Africa happens to sit on the right side of that equation, while the United States does not.The first driver has been commodities. Gold, platinum and other precious metals have risen sharply. For a country like South Africa, that matters more than most political speeches. Higher commodity prices improve the balance of payments, support the currency and raise the future cash flows that companies and the state can generate.The second driver has been interest rates. Long-dated government bond yields have fallen from the eye-watering levels of 12 to 14 percent seen not long ago to around 9 to 10 percent. That shift is not trivial. It lowers the discount rate investors use to value future cash flows and lifts asset prices across the board.Put those two together and you get higher expected cash flows being discounted at lower rates. That alone explains much of the rally.Viljoen stresses that this has little to do with political brilliance. If anything, he jokes that the biggest benefit of the government of national unity is its inability to do very much. Less government, fewer bad decisions, and fewer shocks to the system.While South African assets were ignored and written off, US assets became the default destination for global capital. Today, the United States makes up more than 70 percent of major global equity indices, despite accounting for closer to 40 percent of global GDP. Investors are heavily overweight the US, often without even realising it.That overweighting has been turbocharged by passive investing. Exchange-traded funds buy stocks regardless of price, according to index weightings. When money flows in, it pushes up prices of the largest stocks even further. Nvidia, Microsoft, Apple and their peers have benefited enormously from this dynamic.Viljoen does not deny that markets can stay irrational for long periods. Betting against that trend has been painful for many investors. But he believes limits eventually assert themselves.Emerging markets, including South Africa, have quietly started outperforming developed markets over the past 18 months. US small caps have begun to outperform large caps. Commodities, value stocks and emerging markets are all moving together again, a pattern seen many times before.This is how regime shifts tend to start. There is no bell at the top. No clear signal that the old order is over. Just subtle changes in relative performance that most people ignore until they become obvious in hindsight.Viljoen’s core argument is simple. South African assets remain undervalued and under-owned. US assets are over-owned and expensive. Even after the recent rally, South African bond yields offer a massive real premium over inflation. That premium exists not because South Africa is thriving, but because investors remain sceptical.For a value investor, scepticism is fuel.That does not mean South Africa is suddenly low risk. Viljoen is clear that it remains a volatile, uncertain market. He does not advocate putting everything into local assets. He simply argues for owning more than most investors currently do.The same measured approach applies to other areas of the market. On Bitcoin and cryptocurrencies, Viljoen sees potential but not certainty. The technology could reshape finance, or it could disappoint. That uncertainty argues for exposure, but not excess.On banks, he acknowledges both sides of the debate. South African banks are profitable, well capitalised and supported by sticky customers. At the same time, they face competition from fintech, retailers and eventually blockchain-based systems. The sector remains attractive at current prices, but growth may be slower and executive remuneration remains a sore point.Perhaps the most striking aspect of Viljoen’s thinking is his focus on history rather than forecasts. He quotes Cicero approvingly. Those who do not study history remain children. For Viljoen, history teaches humility. Markets are uncertain. Outcomes are never clear in advance. The best investors focus on odds, not certainty.That mindset also explains his decision to step away from social media. Less noise. More reading. More thinking. Better decisions.If Viljoen is right, the last 18 months may mark the early stages of a longer cycle. Not a straight line. Not without setbacks. But a period where emerging markets and undervalued assets finally get their turn.By the time that becomes obvious to everyone else, the easy gains will already be gone.

Director’s Cut: Piet Viljoen – Why SA shares are beating the MAG7 and the US party won’t last

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