Global investor confidence up in May but Asia investors more cautious: State Street

Screens showing stock market movements at a securities company in Beijing, China, on May 20, 2019.
Screens showing stock market movements at a securities company in Beijing, China, on May 20, 2019.PHOTO: NYTIMES

SINGAPORE - Global investor confidence rose in May from the previous month, though institutional investors in Asia were more cautious, according to the latest data from State Street Global Exchange.

Its Global Investor Confidence Index (ICI), which measures investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors, rose 6.6 points to 79.5 in May, from April's revised reading of 72.9.

Confidence among North American and European investors also improved, with the North American ICI rising from 71.3 to 76.7, and the European ICI rising from 86.6 to 92.5.

In contrast, the Asia ICI slipped 4.2 points to 88.4.

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.

Kenneth Froot at State Street Associates who co-developed the index, noted: "Trade war and Brexit-related uncertainty dominated this month's headlines. Institutional investors have been wary, and with potential supply-chain disruptions and concerns about rising protectionism, it is understandable that sentiment remains anchored in the risk-averse territory.

"However, while the low level of the index points to risk-off behaviour over the last few months, the solid uptick this month indicates some investors may be moving back in to buy the dip."

Added Marvin Loh, senior global macro strategist at State Street Global Markets: "Investors that embraced 'sell in May and go away' rested easier this month, as risk assets are experiencing their weakest performance of the year. Driven by trade and growth concerns, global equities are set to close broadly in the red for the first time this year.

"Yields have all but collapsed, with developed market sovereign interest rates falling to their lowest levels in years. The overall hesitancy that we have seen from investors all year, reflects many of the concerns that emerged this month."