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Improved confidence yet to translate to market shift

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  • Improved confidence yet to translate to market shift

US - Global investor confidence is said to have improved as a monthly sentiment recorder has climbed 12.1 points against the end of last year, but analysts have questioned whether the improved confidence is actually shifting into market sentiment given the ongoing turmoil.

The latest edition of the State Street Investor Confidence Index for January 2009 revealed investors are more confident about the global stock markets as the confidence index has shifted from 48.2 points in December 2008 to 60.3 points in January 2009 - the steepest rise since August 2007 and a move which State Street officials say signals a renewed confidence in equities and a more positive outlook from institutional investors.

North American investors, whose confidence rose 21.2 points, were the main contributors to the rise, according to Paul O'Connell, associates director for State Street.

"The rebound in confidence among North American investors is the most striking thing about this month's results. The increase represents a substantial improvement in outlook," said O'Connell.

"While some of the increase is attributable to risk reallocations going into the New Year, it may also be true that institutional investor perceive that the risk of systemic collapse has abated somewhat in the wake of recent policy action," he added.

European institutional investors also shared a more positive outlook, with confidence rising 6.7 points this month to 73.0, while Asian investors' confidence stayed relatively the same, falling slightly from 86.6 to 86.3.

But Ken Foot, a professor at Harvard University and developer of the index, said: "While institutions looked more favourably on risky assets this month than they did at any time in the fourth quarter of 2008, it remains to be seen whether these reallocations represent changes in long-term convictions about the value of those assets."

The State Street Investor Confidence Index is conducted by State Street Global Markets, the investment research and trading branch of State Street Corporation, and monitors investors' risk appetite and their willingness to allocate their portfolios to equities.

The index uses quantitative data by analysing the buying and selling patterns of institutional investors.

According to its latest financial statement, issued yesterday, State Street had
$1.44tn (€1.11trn) in assets under management at the end of 2008 compared with $1.7trn at the end of September 2008.

If you have any comments you would like to add to this or any other story, contact Poppy Sketchley on + 44 (0)20 7261 4629 or email poppy.sketchley@ipe.com

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