SINGAPORE (Jan 30): Investor confidence for January has plummeted, according to the Investor Confidence Index (ICI) released on Wednesday by State Street Global Markets (SSGM).
Globally, investor confidence dropped by 3.2 points to 76.5 in January, from December’s revised reading of 79.7.
The decline was led by a 3.4 point decline in the North American ICI to 68.2 and a 3.9 decline in the European ICI to 105.5.
The ICI measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors.
A neutral reading of 100 reflects a level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. A reading below 100 reflects a decrease while one above 100 indicates an increase in long-term allocations to risky assets.
“It is telling that the confidence of European investors has continued to fall,” says Michael Metcalfe, head of Global Macro Strategy at SSGM.
“This is similar to the first round of asset purchases from the European Central Bank (ECB) that the promise of buying has as big – if not bigger – signaling effect for investors than the action of buying itself,” he adds.
Meanwhile, the Asian ICI rose 4.8 points to 93.9. However the increase was not big enough to mitigate the declines from the other regions.
For now, Metcalfe warns that investor confidence may further decline, in light of the novel coronavirus that originated from Wuhan, China.
“The cutoff date for this reading (on Jan 22) means that the potential impact of the escalated contagion of the coronavirus on sentiment will not be captured this month,” he points out.
Stock markets have already reacted on the news – dropping significantly from their previous close.
The Straits Times Index (STI) for one, opened 2.08% lower at 3,172.73 points on Tuesday following the Lunar New Year break, before hitting a day low of 3,144,10 points – some 2.96% lower than its previous close of 3,240.0 on Jan 24.
