Market Research

Investor Confidence Continues To Improve

Sally Ling Reporter 1 March 2013

Investor Confidence Continues To Improve

Investor confidence continues to improve despite a number of risks to the global economy, according to data from State Street Global Markets, part of State Street Corporation.

The firm’s global investor confidence index rose 8.7 points in February to finish at 94.8, up from January’s reading of 86.1.

As in January, the increase was driven by North American institutions, whose confidence rose 13.9 points from January’s level of 85.1 to reach 99. European institutional investors also felt more optimistic pushing the index for that region up from 89.4 in January to 92.2 in February.

This is in marked contrast to recent research from Spectrem Group on individual wealthy investors - as opposed to institutions. Yesterday the firm said confidence among wealthy US investors fell in February, with news of the budget cuts dominating the headlines.  

In the results compiled by State Street, risk appetite among Asian institutional investors declined by 4.5 points from a reading of 91 in January, settling at 85.5. State Street suggests that this might reflect question marks around whether growth in the region will be internally or externally driven going forward.

“Since reaching a record low in November, the appetite for risk has rebounded considerably. There are a number of risks on the horizon that may give investors pause, including US fiscal negotiations, the outcome of the Italian elections and the direction of Fed policy, so caution is warranted. That being said, it’s fair to say that strong and persistent ‘de-risking’ by institutions that has characterized recent years has been suspended, at least for now,” Harvard University professor Kenneth Froot, who developed the index in collaboration with State Street’s Paul O’Connell, said in a statement.

The State Street investor confidence index analyzes the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors. The January ICI figures shown have been revised since they were issued.

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