China cracks tech whip: Naspers, SA investors feel the pain – Magnus Heystek

Magnus Heystek is the founder of Brenthurst Wealth Management. Last week, Heystek joined BizNews for a highly informative webinar about investing in SA. With the country going through violent protests and rioting, many were concerned about their financial status in South Africa. This week, Heystek gives further insights into what to do with your hard-earned money, in light of the Chinese government putting its ” idealogical jackboot back on”, as BizNews founder Alec Hogg described it. Because of this, the value of the country’s next-gen tech companies are plummeting – directly affecting Naspers/Prosus. – Jarryd Neves

Magnus Heystek on the civil unrest that gripped South Africa a fortnight ago:

If you look at what happened two weeks prior, on a global scale, I don’t think any modern [and] industrialised country has seen those kind of scenes. If you see now, they’re adding up all the damages – we’re talking about 200+ shopping centres that were looted and burned to the ground. That is just unheard of. People are concerned and they are trying to find questions. We tell a lot of people that we simply don’t have all the answers. But we do look at the basics and try and advise them as best. I think a lot of people have now realised that the investment world is not as they want it to be, but is just how it is.

I think, suddenly, people are changing their perception on certain asset classes which they wouldn’t, until recently, even consider – like selling some of their properties or some of their local share portfolios and looking at a Plan B option. They realised that some of the assets are at risk.

On the Chinese government’s decision and how it’s affecting investors: 

The world is trying to find out, work out what exactly the Chinese government is trying to do. It seems like they have a strategy and nobody really knows what that strategy is. It’s going to impact on on everybody – and you must make a call. Do you ride it out or do you look for something else? I don’t know. I don’t have any Naspers and I haven’t for a very long time. It hurt me when it was running away, but now I’m feeling a little bit better because I’ve been concerned about that exposure. If I do like tech and global tech, I can get it through a global tech fund – which is not that exposed to Naspers.

On Tongaat Hulett:

It’s got land – and it’s in the wrong spot. If it was in the Western Cape, you would have had a different tune. But it’s right there where everything happened. As you quite rightly point out, everybody is evaluating further developments, looking at the valuation of existing land and/or property structures, because the question is: can this happen again? There’s no guarantee that government will prevent it. They’ve shown up very badly in the way they prepared – no intelligence.

They were flapping around for four or five days and still don’t seem to have a handle on it, because the threat has now moved to the ports, which have now declared a force majeure. We are already one of the worst ports in the world and now we can’t get our stuff out of the harbours and back in, which is another blow to the credibility of South Africa. One doesn’t know if this is linked. Nobody’s talking about it. But it is another body blow to the poor South African consumer/investor.

On investing in KZN property:

It’s a loaded question, in some regards. To do what? Buy to live there or purchase a holiday home? Probably not. I think there’s going to be a fallout. There might be a time when the property values are so cheap because they are some fantastic developments there – and fantastic ones at that so fantastic developments. It is a [great] place to live and play golf – but it’s what’s around you. We’ve now seen how the social unrest can have an impact on your property values. The answer is, at the moment, probably not.

On the South African rand:

The rand is currently boosted by the balance of trade, which is driven by the massive profits the platinum mines have generated over the last six to eight months. We very lucky that the platinum price shot up and these profit figures coming through from the platinum companies are enormous. We are still benefiting from a boost in agricultural exports. Those are cyclical factors that are moving out of the system.

We are still a little bit protected because our balance of payments has been remarkably positive. That will quietly wind its way down and the rand will start weakening. That’s just the way I see it. Yes, it moved from 14,20 to 15,00 at one stage. But there’s an underlying weaker bias in the currency at the moment. From now towards the end of the year – barring major upheavals – 15,50, maybe 16 is kind of indicated to our clients.

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