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Oct 28, 2015

Global investor confidence declines on uncertainty over growth

Asian investor confidence rises amid massive support from Chinese government

Global investor confidence fell in October, led by investors in North America and Europe, amid uncertainty over economic growth and central bank stimulus policies, according to a survey by State Street Global Exchange.

The State Street Global Investor Confidence Index (ICI) dropped 2.3 points to 114.3, compared with September’s revised reading of 116.6, State Street says in a press release. The North American ICI declined the most, falling 7.7 points to 125.5 as slowing Chinese economic growth and uncertainty over whether the US Federal Reserve will raise interest rates at its mid-December meeting.

The Asian ICI, meanwhile, climbed 13.2 points to 111, moving into positive territory, or above 100 points, for the first time this year. State Street says massive Chinese government support for stock markets in the country and dovish policies by central banks elsewhere, have helped boost Asian sentiment.

‘Despite the ongoing uncertainty about the global outlook and dovish comments from the Fed, global institutional investor confidence remains largely positive,’ says Ken Froot, who helped design the index. ‘Meanwhile, the increasingly accommodative stance taken by policy makers globally and hopes for state-owned enterprise reforms in China have had a large impact on Asian investors.’

The European ICI dropped further into pessimism, falling 5.9 points to 89.9, as the threat of deflation in the region remained and the European Central Bank failed to deliver on suggestions that it could step up its stimulus program to boost the economy.

‘The drop in European investor sentiment is a worrying sign in light of some of the fundamental data we have seen across the currency union of late,’ says Timothy Graf, head of macro strategy for State Street Global Markets in EMEA. ‘With inflation not recovering in the eurozone, recent central bank hints at further easing may need to become more concrete before we see a significant increase in confidence.’