Investor Confidence Improving – State Street

Sally Ling

31 January 2013

State Street Global Markets, the investment research and trading arm of State Street Corporation, reports that its investor confidence index has risen for a second consecutive month. The ICI increased by 5.4 points in January, up from December’s (revised) reading of 81.4 to finish at 86.8.

The firm says that the increase was driven by North American institutions, whose confidence rose by 7.8 points from December’s level to reach 86.3. Institutional investors in Asia also felt more optimistic and this pushed the Asian ICI up, from 87.1 in December to 91.0 in January. In contrast, risk appetite among European institutional investors continued its decline, falling from 94.1 in December to 89.6 at the end of January.

“In recent months we have seen the disparities in confidence that prevailed across regions for much of 2011 and 2012 dissipate. There is now more global consensus on the appropriate stance to take towards risky assets. It remains the case that all three regional indices are below the long-term neutral level of 100, but our underlying data reveal consistent recent buying of equities in the US, Japan, Europe (excluding the UK) and emerging markets,” State Street’s Paul O’Connell said in a statement.

The State Street ICI 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.