Surveys

North American, Asian Investor Mood Improved In December, Europe Slips

Tom Burroughes, Group Editor, 5 January 2021

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Investment confidence in two of the three main regions that State Street tracks improved in the final month of 2020. Hopes about vaccines and US stimulus efforts helped propel gains in the US.

Investment confidence rose in North America and Asia in December last year although it remained soft in Europe, according to a report that tracks the actual buying and selling habits of market players. 

The Global Investor Confidence Index, produced by State Street, rose to 104.1, up by 13.3 points from November’s revised reading of 90.8. The North American ICI rose by 15.9 points to 103.5, and the Asian ICI increased by 17.4 points to 112.6. The European ICI fell for the fourth straight month, down by 4.6 points to 87.2.

“As an overwhelming 2020 finally draws to a close, investors ended the year on a more optimistic footing with the Global ICI recording its highest reading in over two years,” Rajeev Bhargava, head of Investor Behaviour Research for State Street Associates, said. “The uptick in risk-seeking behaviour was largely driven by US and Asia investors as the release of COVID vaccines this month, prospects of a fresh stimulus package out of the US and post-election certainty are likely contributing to a more positive outlook on asset markets.”

“However, as COVID cases continue to surge globally, we will need to see if the momentum persists into the new year as more data becomes available on the vaccines overall effectiveness, but certainly December’s reading of global sentiment is a good supporting data point that we may be heading in the right direction,” Bhargava said. 

The index measures investor confidence or risk appetite quantitatively by analysing the 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.

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