Investor confidence dropped in November as a perceived slowdown in Chinese economic growth, regional conflicts and mixed central bank policies in Europe, the US and Japan increased market volatility, according to the State Street Investor Confidence Index.
The Global Investor Confidence Index (ICI) dropped 1.8 points in November to 114 points from October’s revised reading of 115.8 points, State Street says in a press release. North American investors led the decline, with a drop of 4.4 points to 104.3 while the Asian ICI declined 2.7 points to 96.9.
‘The increase in market volatility seen in October has tempered some of the enthusiasm North American investors have for risky assets,’ says Jessica Donohue, head of research and advisory services at State Street Global Exchange. ‘While the major equity indices have recovered from their recent dive and again are at all-time highs, there is a renewed appreciation for the fragility of growth outside the US, and the risk that deflation represents.’
Global concerns, including deflation in Europe, conflict in the Middle East and the Chinese slowdown, appeared to dampen expectations of investors in Asia and North America but, surprisingly, Europeans are the only investors to show an improvement in confidence in November, the State Street data shows: the European ICI jumped 20.7 points to 141.9 as the others dropped.
State Street says the discrepancy between European investors and those elsewhere likely stems from pockets of high investor enthusiasm in some parts of Europe. A positive outlook in the UK, for example, could more than make up for lower investor expectations in Italy or elsewhere.
‘The most striking element of this month’s results is the increase in the European ICI,’ says State Street’s Paul O’Connell, co-founder of the index. ‘An examination of the underlying data indicates that investors in Europe are being selective. While there are strong inflows into UK equities, there is less enthusiasm to allocate to equities in other regions. Accordingly, some portion of the recent increase may well turn out to be transitory.’
