Asia is leading State Street Global Investor Confidence Index with a 6.3 point boost, rising to 97.5 from November’s reading of 91.2, and overall global investor confidence rose 3.1 points to 103.9 from November’s level of 100.8.
State Street Global Markets, the investment research and trading arm of State Street Corporation released the results of the State Street Investor Confidence Index for December 2009 last week.
Asia led the pack, with confidence remaining largely constant in other regions. Investors’ sentiment rose moderately in North America from 102.2 to 103.1, while in Europe risk appetite declined slightly from 104.8 to 104.6.
The index measures investor confidence on a quantitative basis by analysing the actual buying and selling patterns of institutional investors. It is not a survey, but rather fact-based, and was developed through State Street Global Markets’ research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Paul O’Connell.
The index is based on a financial theory that assigns precise meaning to changes in investor risk appetite. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.
“This month’s up-tick in global investor confidence stemmed largely from an improvement in the mood in Asia, where risk appetite rose to an eight-month high,” Froot said.
“Elsewhere portfolio reallocations were modest. With three of the four indices over the neutral level of 100, institutions are continuing to add to their risky asset positions, but at a slower pace than was evident earlier in the year. Investors will be watching for signs of renewed economic growth, and well-designed exit strategies from policy makers, before making more significant reallocations towards risk in 2010.”
“For the year as a whole, investor confidence staged a meaningful recovery from the historic lows of 12 months ago, leading the way ahead of other measures such as equity prices, consumer confidence and surveys of investor expectations,” added O’Connell. “By quantitatively measuring the actual risky asset allocations of institutional investors, the State Street Index shows that institutions were ‘ahead of the curve’ in anticipating the risk rally this year.”