SINGAPORE (Aug 1): Investors across North America, Europe and Asia Pacific are showing a waning appetite for risk, according to State Street Corporation’s Investor Confidence Index (ICI) for July.
Global ICI fell 2.4 points to 84.9 in July, compared to June’s revised reading of 87.3.
The index measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.
A reading of 100 denotes the neutral level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.
“The minor stumble in investor confidence is notable not just because it runs counter to the new highs made in the prices of some risky assets, but because confidence fell in all three regions, albeit by different amounts,” says Michael Metcalfe, senior managing director and head of Global Macro Strategy, State Street Global Markets.
North American ICI – already below the global average – dipped further from 81.6 to 80.6, while European ICI fell from 103.3 to 99.3, retreating below the neutral 100 reading.
Meanwhile, Asian ICI showed one of the biggest drops in investor confidence, falling 4.0 points from 95.9 to 91.9 in July.
“The fact that confidence fell the furthest in the APAC region is perhaps testimony to questions of how much stimulus will be forthcoming from policymakers in the region,” Metcalfe says. “Investors may not be bound by the same supply chain linkages that global manufacturing is, but the risk of contagion remains.”
Investor confidence had ticked upwards in June, but the rally turned out to be short-lived, says State Street’s Kenneth Froot, who co-developed the index.
“In July, investors have exhibited renewed risk aversion, and while US equities reached record highs, global equities did not participate in the excitement,” Froot says.
“In a bid to alleviate the drag on global growth and earnings, developed-market central banks are dovish, and the Federal Reserve is expected to cut rates. And now, in spite of trade talks between the US and China, continued uncertainty over supply chain disruption and Brexit appears to persist,” he adds.
