Global investor confidence falls in September, led by North America, despite QE3 announcement

North American investor confidence at lowest level of the year, while European investor confidence rises

Global investor confidence fell in September, led by declining confidence in North America, as slowing growth in Asia prompted investors to shy away from risk, despite monetary policy moves in both Europe and the US, according to State Street Global Markets.

The State Street Global Investor Confidence Index dropped to 86.9 points in September from a revised 91.0 in August, State Street says.

The index for North America fell to 81.1 points from 84.3 and the Asian index declined to 87.6 from 93.2 over the same period. The European index, meanwhile, increased four points to 105.0.

‘This month’s decline in global investor confidence is the result of diminished risk appetite among both North American and Asian investors,’ says Harvard University professor Kenneth Froot, who co-developed the State Street index, in a statement.

‘While diminished growth expectations for Asia account for some of the reticence in that region, the third consecutive decline in confidence among North American investors is more puzzling, especially given recent announcements by monetary policy makers on both sides of the Atlantic. It is clear that in their actual portfolios, institutional investors continue to exhibit caution given the global growth backdrop.’

The State Street index measures investor confidence by analyzing buying and selling patterns of institutional investors. An index level of 100 is neutral, while anything lower indicates investors are steering away from assets perceived as risky and a higher reading indicates they are acquiring ‘risk’ assets.

The global index level in September is at the second-lowest level for this year, after the 86.6 points recorded in February. The North American index level, which has dropped for four consecutive months, is at the year’s low point while the index for Asia is at the second-lowest of 2012.

The European index, however, is at its highest level since before January 2011, the earliest month for which State Street gives historic regional data.

In September, data from China and other Asian countries further signaled the possibility of economic slowdowns in that region. Also this month, the US Fed announced the so-called QE3, the promise to purchase mortgage-backed securities at a rate of $40 bn a month indefinitely.

‘We observed a pronounced improvement in tone from the first week of September onward,’ says Paul O’Connell of State Street Associates in the statement.

‘Nonetheless, the reallocations away from risky assets early in the month were large enough to outweigh the later stabilization. As with last month, emerging markets continue to attract some positive inflows.’

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