Investor confidence up for January

Despite investor confidence rising three points this month, financial analysts are warning investors not to read too much into it.

The State Street Investor Confidence Index for January 2008 reached 68.8, from a revised December level of 65.8, with North American investors the main group responsible for the upswing.

For the month of January 2008, the North American index rose from 65.3 to 71.8, while European investors also contributed to the increase rising from 85.0 to 86.6. Among Asian investors, confidence retreated slightly from 85.6 to 85.4.

Andrew Capon, from State Street Global Markets, said this month’s meagre recovery could yet prove “stillborn”, as the 68.8 reading was still lower than any other recorded, with the exception of December’s nadir.

“After this month’s feeble recovery, the ICI has still fallen 31 per cent since August. That is still further and faster than most stock markets,” he said.

“The FTSE 100 and S&P 500 indices are still to retreat 20 per cent from their recent peaks, though the Nikkei 225, Australia All Ordinaries, Singapore Straits Times and Hang Seng are among those that are now officially mired in a bear market.”

According to Capon, flows continue to offer a relentlessly negative signal, with market flows actually deteriorating in recent weeks.

“Those hoping that December’s gloom merely reflected on unwillingness to take risk ahead of the year end have been proved wrong. There has been no reallocation to equity markets in January.”

Capon concluded that while “the small twitch upward of confidence might represent a pinprick of light … the journey from this dark tunnel of despond will be long, treacherous and not for the faint-hearted.”