Global investor confidence in 'surprisingly shallow' recovery: State Street

WHILE there has been recovery in global investor confidence, it has been "surprisingly shallow", according to State Street Global Exchange.

State Street's Investor Confidence Index (ICI) rose 0.4 points month-on-month to 71.3 in March 2019, from a revised reading of 70.9 in February. Confidence among North American investors rose from 66.22 to 68.3. In Asia, the index increased by 3.6 points to 100.00 while the European index declined by 7.8 points to 88.4.

An index reading above 100 shows that institutional investors are deploying more exposure to risky assets, while a reading below 100 means that they are reducing their exposure to risky assets.

"The recovery in investor confidence has been surprisingly shallow given the 'V-shaped' recovery in the prices of risky assets," said Michael Metcalfe, senior managing director and head of global macro strategy for State Street Global Markets. "Indeed, investor confidence declined even further in Europe as fundamental news continues to deteriorate." 

Index developer Kenneth Froot said investors continue to face mounting political risks, including the potential for a hard Brexit, a breakdown in US-China trade talks, and the potential for populist wins during the European Parliament elections in May.

"The heightened uncertainty appears to be driving North American and European investors away from risk," he added.

The ICI measures investor confidence or risk appetite quantitatively by analysing 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.

It differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.