Investor confidence falls in October
State Street has announced that its Global Investor Confidence Index (ICI) fell to 84.4 in October, down 3.4 points from a revised September reading of 87.8.
Confidence among European investors waned, with the European ICI decreasing from 100.2 to 90.9. The North American ICI declined by 2.6 points to 81.8, while the Asia ICI dropped 0.3 points to 99.6, State Street said.
The ICI measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence, the firm explained.
A reading of 100 is neutral – it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors, State Street said.
“As major stock indices were hitting record highs near summer’s end, there were signs that institutional investors were reducing risk exposure,” said Kenneth Froot of State Street Associates, one of the developers of the index.
“As we’ve progressed into fall, equities have declined further as the VIX has doubled. In the US, this month’s sell-off erased all 2018 year-to-date equity market gains, and amid concerns about high valuations and whether earnings may have peaked, some market participants seem to be anxious over a prolonged period of risk aversion.”
Michael Metcalfe, head of global macro strategy at State Street Global Markets, said that the sharp downgrade in the index recorded in September was one of the few early warning signs of the ensuing market turbulence that has followed.
“Confidence has fallen further in October and is more widespread, especially in Europe where not only are political risks rising, but growth is disappointing too,” he said.
“The main difference this month is that the Investor Confidence Index is no longer alone in pointing to potential vulnerabilities; business and consumer confidence are also beginning to wobble too.”
Recommended for you
Record flows into iShares ETFs helped BlackRock’s assets under management reach US$13.5 trillion in the third quarter, but it reported outflows from the APAC region.
Regal Partners has passed $20 billion in funds under management, helped by $723 million in net inflows during the last three months.
Global investment manager Fidante has formed a strategic partnership with a London-based asset manager to secure exclusive distribution rights across the APAC region.
Blackwattle Investment Partners has hired a management trio from First Sentier Investors – who departed amid the closure of four investment teams last year – to run its first equity income offering.
