Global investors getting less pessimistic: Study

PHOTO: Global investors getting less pessimistic: Study

Global institutional investors are less pessimistic at the start of this year than previously.

A global investor confidence index (ICI) released by State Street Global Markets on Wednesday reflected higher investor confidence and risk appetite, as the index rose for a second consecutive month to 86.8 in January, from December's revised reading of 81.4.

The reading, which falls below the baseline of 100, means that investors are still reducing their long-term exposure to risky assets. The index has not crossed the 100-mark since August 2011. Asian institutional investors showed more confidence as well, with its index climbing to 91 in January from 87.1 in December.

Confidence levels of North American institutions rose the most. The region's index jumped to 86.3 in January from December's revised level of 78.5.

In contrast, confidence among European institutional investors extended their December decline into the new year. Its January level fell 4.5 points to 89.6, from 94.1 last month.

Said Paul O'Connell of State Street Associates: "It remains the case that all three regional indices are below the long-term neutral level of 100, but our underlying data reveals consistent recent buying of equities in the US, Japan, Europe (excluding the UK) and emerging markets."

A greater percentage allocated to equities on the index means higher risk appetite or confidence.

The index differs from other survey-based measures in that it analyses actual buying and selling patterns, instead of collecting opinions from institutional investors.

Harvard University professor Kenneth Froot, who co-developed the index with Mr O'Connell, said: "2013 has opened with something of a turnaround in demand for global equities by institutional investors. This comes on the heels of a two-and-a-half year period of persistent 'de-risking' by these institutions."

But he cautioned that this could also just be a short-term deviation from the trend, rather than a more concerted effort among institutional investors to rebuild their core equity positions.

Mr O'Connell also noted that disparities in confidence that prevailed across regions for much of 2011 and 2012 are dissipating in recent months, as suggested by the index. "There is now more global consensus on the appropriate stance to take towards risky assets," he said.