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Global investor confidence up in May

GLOBAL investor confidence has risen in May, boosted mainly by improved sentiment in North America, State Street Global Exchange said on Wednesday.

The Global Investor Confidence Index (ICI) rose to 102.5, up 5.1 points from April's revised reading of 97.4. Sentiment in North American rose to 104.1, from 95.1, while that in Europe firmed marginally to 96.9 from 96.2. In contrast, the Asian ICI continued to slip to 101.1 from 104.6.

"After 10 consecutive months of readings below 100, Global investor confidence is finally picking up steam," said Rajeev Bhargava, managing director and head of Investor Behavior Research, State Street Associates.

"Markets continue to anticipate a very gradual course for the Federal Reserve rate hikes, and with hopes for increased infrastructure spending and tax reforms, the North American ICI readings are resonating with the uptick in risk appetite."

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The index measures investor confidence or risk appetite by analyzing the actual buying and selling patterns of institutional investors. A reading of 100 is neutral. It is a level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.

Kenneth Froot, who co-developed the index with fellow colleague, Paul O'Connell, at State Street Associates, said European investors are taking a pause to reflect on elevated valuations in the region following the strong run year-to-date.

"In contrast, Asian ICI has remained in a risk-on environment, perhaps reflecting the superior earnings growth in the region, as well as the falling risk premium in China," Mr Froot said.