The State Street Global Exchange global investor confidence index (ICI) for November fell to 91.3, down 4.2 points from October’s revised reading of 95.5.
The decline was due to a relatively steep fall off in European sentiment – the mood of the investing public – to 101.5 from a revised reading of 111.3 in October, State Street said.
European confidence had reached its highest level since July 2007 last month, but backed down mainly due to weaker sentiment in the UK.
While Europe investor mood declined, in North America and Asia it improved slightly over the month fuelled by better economic news out of both regions. The North American ICI increased by 3.2 points to 89.4 and the Asian ICI rose 3.4 points to finish at 98.9 from an October revised value of 95.5.
In general, Australia is an economy strongly tied to the global economic cycle, State Street Global Exchange’s Asian head of sales, trading and research Jeremy Armitage told Wealth Professional.
“So to the extent that changes in investors’ level of confidence reflect a change in their propensity to hold relatively risky assets, then Australian investors should consider whether their personal level of confidence has changed in a similar fashion.
“It might be thought of as a way to benchmark their own risk appetite against global and regional peers. While we do not produce specific country measures of investor confidence, for this purpose Australian investors’ behavior would contribute to the Asian ICI measure.”
Investor sentiment continues to be driven strongly by policy, particularly in the US where confidence globally is still very fragile, Armitage said.
But improved US economic data and consensus around the Yellen nomination implying delayed tapering seem to be leading to an uptick in North American investor confidence, Harvard University professor Kenneth Froot said.
“Investors in the US are still aware of the challenges and overall confidence reflects this as sentiment has yet to return to a more neutral stance.”
The ICI was developed by Froot and State Street Associates. It 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.
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.