US investors fuel risk revival
Global investor confidence has returned to levels of last summer, according to a State Street index, in what is the second indication of optimism in the world markets in a little over a week, with North American investors in particular showing increased risk appetite.
State Street's Investor Confidence Index, which measures investors' exposure to equities, rose 9.4% to 79.6, the highest figure since July last year. The figure is up from a one year low of 48.2, measured six months ago.
The index, which was developed by State Street's research partnership State Street Associates, measures confidence by analysing the buying and selling patterns of investors. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.
Ken Froot, who helped develop the index, said: "The data reveals that institutional investors have participated with some enthusiasm in the recent market recovery."
He added: “For example, monthly flows into US stocks are currently in the 98th percentile. Our measure of investor confidence, which goes beyond pure measure of flow, shows that the foundation for this rally was laid with the turnaround in risk appetite that began last September.”
The research follows similar findings in the monthly Merrill Lynch Survey of Fund Managers, which last week found that investors had begun to show levels of risk appetite last seen before the demise of Lehman Brothers.
Gary Baker, co-head of international investment strategy at Bank of America Securities - Merrill Lynch Research, said at the time: "April was a watershed in terms of risk appetite in fund management. In April there has been a major crack in sector rotation and surge in global growth optimism, which began with improvements in China, but it has since broadened out."
Both surveys found European investors to be the least confident, with the State Street index showing European investors lagging just over a point behind US investors and almost 20 behind Asian investors.
Similarly, the Merrill Lynch survey found that European managers had been the least keen to bring risk back to portfolios, refusing to believe things were getting better.
-- write to mturner@efinancialnews.com
del.icio.us
Digg
Newsvine
reddit
StumbleUpon