Investor confidence drops for first time in nine months
Global investor confidence has declined for the first time this year, with North America leading the fall, as institutional investors sought to consolidate their holdings of risky assets and take a step back from the market.
Confidence fell by 4.7 points to 118.1 in September, from a revised August level of 122.8, according to State Street Investor Confidence Index statistics published yesterday.
The fall is the first in nine months. Investor confidence rose to a five-year high in July this year, hitting 119.4, the highest score since May 2004. The index has risen consecutively since December last year, when the index hit a low of 82.8.
Ken Froot, Harvard University professor and co-author of the research said: “There is a recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance.”
State Street's index measures investor confidence on a quantitative basis by analysing buying and selling patterns among institutional investors. According to the index, an investor is deemed to be more confident, the more of its portfolio it allocates to equities.
The confidence of North American institutional investors fell 4.6 points from 118.3 to 113.7. However, European investor confidence rose from 109.3 to 110.9, increasing for the sixth consecutive month, while Asian investor confidence also improved.
State Street Associates director Paul O’Connell said: “During the financial crisis and the subsequent recovery, European investor risk appetite has lagged that of North American institutions by about three months."
He added: "As is true of North American investors, European and Asian institutions will be weighing the prospects for long-term improvement in fundamentals against the eventual withdrawal of the ample liquidity currently being provided by policy makers.”
-- Write to Lauren Willington at lwillington@efinancialnews.com
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