State Street Investor Confidence Index (ICI) rose by 7.2 points to 122.8 for August 2014.
The Global ICI rose to 122.8 in August, up 7.2 points from July’s revised reading of 115.6. The improvement in sentiment was driven by an increase in the Asian ICI from 92.1 to 101.7 and a six point increase in the European ICI to 127.7. North American Sentiment fell one point to 110.3.
The Investor Confidence Index was developed by State Street Associates, State Street Global Exchange’s research and advisory services business, and Harvard University professor Kenneth Froot. It measures investor confidence or risk appetite quantitatively by analyzing 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. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.
"Despite a bout of risk aversion driven by geopolitical tensions in the early days of August, global institutional investor confidence remains resilient," said Jessica Donohue, senior managing director and head of research and advisory services, State Street Global Exchange.
"With benign developed market inflation, institutions may be positioning for continued accommodative policy from central banks."
"The impending targeted longer-term financing operations (TLTROs), a lack of inflationary pressures across the Eurozone, and the potential for more unconventional easing from the European Central Bank (ECB) may have provided tailwinds to European sentiment" added Paul O’Connell.
"Moreover, resilient Chinese growth has reduced fears of a hard landing and helped boost Asian sentiment. With Chinese inflation running at low levels, the People’s Bank of China may also have further room to stimulate the economy."